Over the past six months, Rollins has been a great trade, beating the S&P 500 by 11%. Its stock price has climbed to $57.64, representing a healthy 16.4% increase. This run-up might have investors contemplating their next move.
Following the strength, is ROL a buy right now? Or is the market overestimating its value? Find out in our full research report, it’s free.
Why Are We Positive On ROL?
Operating under multiple brands like Orkin and HomeTeam Pest Defense, Rollins (NYSE: ROL) provides pest and wildlife control services to residential and commercial customers.
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Rollins grew its sales at an impressive 11.2% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers. 
2. Elite Gross Margin Powers Best-In-Class Business Model
All else equal, we prefer higher gross margins because they make it easier to generate more operating profits and indicate that a company commands pricing power by offering more differentiated products.
Rollins has best-in-class unit economics for an industrials company, enabling it to invest in areas such as research and development. Its margin also signals it sells differentiated products, not commodities. As you can see below, it averaged an elite 52.2% gross margin over the last five years. Said differently, roughly $52.16 was left to spend on selling, marketing, R&D, and general administrative overhead for every $100 in revenue. 
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Rollins has shown terrific cash profitability, putting it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the industrials sector, averaging 16.4% over the last five years.
Final Judgment
These are just a few reasons why we think Rollins is a great business, and with its shares topping the market in recent months, the stock trades at 49.4× forward P/E (or $57.64 per share). Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
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