ROL Rollins, Inc.
Premium pest-control franchise; great business, expensive price.
The story
Rollins is a premium pest-control franchise with durable recurring revenue and brand scale advantages in a fragmented industry. Revenue growth is decelerating from double-digit to high-single-digit as the company matures and housing turnover cools. The current 18.7% operating margin is below the prior 19-20% range, suggesting cost pressure or pricing normalization that limits the margin expansion story.
Kept revenue growth at 7.5% and terminal at 4% (below risk-free) as the ~12% 5-year CAGR is clearly decelerating toward mid-single digits. Trimmed target margin from 21% to 20% and sales-to-capital from 1.94 to 1.98 to reflect TTM reality: margin compressed to 18.7% and capital efficiency improved slightly. The story is unchanged—exceptional franchise, richly priced.
Value drivers
| Revenue growth (Y1) | 7.5% |
| Terminal growth | 4.0% |
| Forecast horizon | 10y |
| Target operating margin | 20.0% |
| Years to target margin | 7 |
| Sales-to-capital | 1.98 |
| Beta | 0.85 |
| Failure probability | 0.3% |
| Cost of capital (WACC) | 8.5% |
| Terminal WACC | 9.1% |
Valuation bridge
| PV of explicit FCFF | 4.20B |
| PV of terminal value | 6.78B |
| Equity value | 10.45B |
| ÷ shares → per share | $21.71 |
News
bearish -0.30 · 8 articles
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- 2 Reasons to Like ROL and 1 to Stay Skeptical
- 1 Stock Under $50 to Consider Right Now and 2 We Question
- Why Is Rollins (ROL) Down 7.8% Since Last Earnings Report?
- Coherent After a Record FY26: Is the Stock a Buy After Q4 Earnings?
- 2 Profitable Stocks with Competitive Advantages and 1 That Underwhelm
- H&R Block Q4 Earnings & Revenues Beat Estimates, Stock Up 14.3%
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 4.22B | 7.5% | 18.9% | 597.83M | 148.64M | 449.19M | 414.02M |
| 2 | 4.52B | 7.1% | 19.0% | 646.79M | 151.50M | 495.29M | 420.77M |
| 3 | 4.82B | 6.7% | 19.2% | 697.15M | 153.40M | 543.76M | 425.77M |
| 4 | 5.13B | 6.3% | 19.4% | 748.63M | 154.24M | 594.39M | 428.98M |
| 5 | 5.43B | 5.9% | 19.6% | 800.89M | 153.94M | 646.95M | 430.35M |
| 6 | 5.73B | 5.6% | 19.8% | 853.57M | 152.42M | 701.15M | 429.89M |
| 7 | 6.03B | 5.2% | 20.0% | 906.28M | 149.62M | 756.65M | 427.60M |
| 8 | 6.32B | 4.8% | 20.0% | 949.58M | 145.51M | 804.07M | 418.81M |
| 9 | 6.60B | 4.4% | 20.0% | 991.25M | 140.05M | 851.20M | 408.65M |
| 10 | 6.86B | 4.0% | 20.0% | 1.03B | 133.25M | 897.66M | 397.21M |
Key risks
- Margin compression persists as wage inflation outpaces pricing power
- Acquisition-driven growth model faces rising target valuations
- Climate/weather normalization reduces seasonal pest pressure in key markets
Catalysts
- Accelerated tuck-in acquisitions at favorable prices in fragmented markets
- Digital/subscription platform scaling improving route density and retention