Rollins (ROL)

Pest control company Rollins (NYSE:ROL) met Wall Streets revenue expectations in Q3 CY2025, with sales up 12% year on year to $1.03 billion. Its non-GAAP profit of $0.35 per share was 6.4% above analysts’ consensus estimates.

Company Overview

Operating under multiple brands like Orkin and HomeTeam Pest Defense, Rollins (NYSE:ROL) provides pest and wildlife control services to residential and commercial customers.

Many facility services are non-discretionary (office building bathrooms need to be cleaned), recurring, and performed through contracts. This makes for more predictable and stickier revenue streams. However, COVID changed the game regarding commercial real estate, and office vacancies remain high as hybrid work seems here to stay. This is a headwind for demand, and facility services companies are also at the whim of economic cycles. Interest rates, for example, can greatly impact commercial construction projects that drive incremental demand for these companies’ services.

Other large-cap international pest control companies include Ecolab (NYSE:ECL), Reckitt Benckiser Group (LON:RKT), and Spectrum Brand (NYSE:SPB).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Thankfully, Rollins’s 11.5% annualized revenue growth over the last five years was impressive. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Rollins’s annualized revenue growth of 11.1% over the last two years aligns with its five-year trend, suggesting its demand was predictably strong.

We can dig further into the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Rollins’s organic revenue averaged 7.3% year-on-year growth. Because this number is lower than its two-year revenue growth, we can see that some mixture of acquisitions and foreign exchange rates boosted its headline results.

This quarter, Rollins’s year-on-year revenue growth was 12%, and its $1.03 billion of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 9.3% over the next 12 months, a slight deceleration versus the last two years. Despite the slowdown, this projection is healthy and suggests the market is forecasting success for its products and services.

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 52.3% gross margin over the last five years. That means Rollins only paid its suppliers $47.71 for every $100 in revenue.

Rollins produced a 54.4% gross profit margin in Q3, in line with the same quarter last year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Rollins’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 19% over the last five years. This profitability was elite for an industrials business thanks to its efficient cost structure and economies of scale. This is seen in its fast historical revenue growth and healthy gross margin, which is why we look at all three data points together.

Analyzing the trend in its profitability, Rollins’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. We like to see margin expansion, but Rollins’s performance still shows it’s one of the better Facility Services companies as most peers saw their margins plummet.

In Q3, Rollins generated an operating margin profit margin of 21.9%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Rollins’s EPS grew at a spectacular 16.2% compounded annual growth rate over the last five years, higher than its 11.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Rollins’s earnings to better understand the drivers of its performance. A five-year view shows that Rollins has repurchased its stock, shrinking its share count by 1.5%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Rollins, its two-year annual EPS growth of 13.1% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q3, Rollins reported adjusted EPS of $0.35, up from $0.29 in the same quarter last year. This print beat analysts’ estimates by 6.4%. Over the next 12 months, Wall Street expects Rollins’s full-year EPS of $1.10 to grow 10.2%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

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 16.5% over the last five years.

Taking a step back, we can see that Rollins’s margin expanded by 2.7 percentage points during that time. This shows the company is heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability was flat.

Rollins’s free cash flow clocked in at $182.8 million in Q3, equivalent to a 17.8% margin. This result was good as its margin was 2.6 percentage points higher than in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Rollins’s five-year average ROIC was 27.4%, placing it among the best industrials companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Rollins’s ROIC averaged 4.5 percentage point decreases over the last few years. Only time will tell if its new bets can bear fruit and potentially reverse the trend.

Rollins reported $127.4 million of cash and $912.1 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $842.5 million of EBITDA over the last 12 months, we view Rollins’s 0.9× net-debt-to-EBITDA ratio as safe. We also see its $10.26 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see Rollins beat analysts’ EPS and EBITDA expectations this quarter. Overall, this print had some key positives. The stock traded up 1.6% to $54.74 immediately after reporting.

Updated: December 4, 2025 at 10:06 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Rollins.

There is a lot to like about Rollins. First of all, the company’s revenue growth was impressive over the last five years. And while its diminishing returns show management's recent bets still have yet to bear fruit, its admirable gross margins indicate the mission-critical nature of its offerings. On top of that, Rollins’s powerful free cash flow generation enables it to stay ahead of the competition through consistent reinvestment of profits.

Rollins’s P/E ratio based on the next 12 months is 48.8x. Expectations are high given its premium multiple, but we’ll happily own Rollins as its fundamentals shine bright. It’s often wise to hold investments like this for at least three to five years, as the power of long-term compounding negates short-term price swings that can accompany high valuations.

Wall Street analysts have a consensus one-year price target of $61.92 on the company (compared to the current share price of $60.34).