Services Sector Ideas

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>>> Rollins (NYSE: ROL) is a leading pest-control company that provides protection against termites, rodents, and other insects to more than 2.8 million customers around the globe. The company reported steadily increasing revenue from 2021 to 2023, going from $2.4 billion to $3.1 billion. Net income increased from $365.6 million to $435 million over the same period.

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The company also dished out higher dividends, paying out $0.54 per share in 2023, compared with $0.42 back in 2021. During this three year period, the business also generated positive free cash flow averaging $435 million a year. These financial numbers point to a solid business with consistent growth in both revenue and profit.

The business continued its positive momentum in 2024's first quarter with revenue climbing 14% year over year to $748.3 million and net income improving by 7% year over year to $94.4 million. Rollins continued its track record of free-cash-flow generation, but investors should note that the company has spent a fair bit of money on acquisitions to expand.

Back in December 2021, the company expanded into Southeast and Southwest Florida through the acquisition of seven branches from Hulett Environmental Services and then rebranding them as Northwest Extermination. In April 2022, Rollins's subsidiary Orkin acquired NBC Environment, a pest-control company centered around bird control with more than 100 staffers. A year later, it purchased Fox Pest Control, which provided Rollins with good growth opportunities and was immediately accretive to earnings and cash flow.

Management has stated that the company operates in a large and highly fragmented industry, giving it ample opportunities to continue growing both organically and through acquisitions.

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