Brad Thomas
Founder & Lead Analyst of Wide Moat Research
Rollins, owner of Orkin, is a solid buy because its route-based pest-control model, with recurring revenue, strong retention, pricing power and low capital needs, lets it keep consolidating a fragmented industry while weaker competitors struggle. Leverage is just 1x, revenue grew 7.9% with organic growth above 6%, and consensus sees 12% growth in 2027 and 11% in 2028. Shares trade near $36 versus $42 of intrinsic value. x.comÂ
Rollins' wide moat is intact; its 31% drop from its high reflects a rising cost of capital, not weaker competitive advantages. About 80% of customers are on recurring service plans, revenue has risen every year, EPS has compounded 13% a year since 2009, and pests don't care about recessions or AI. The question is whether today's price offers enough margin of safety or higher rates create a better entry; @porterstansb expects such names to trade lower until rates stabilize. x.com x.com x.comÂ
Rollins' mission-critical, recurring pest control business has grown revenue for 25 consecutive years, through every crisis. About 80% of revenue is recurring, and nobody cancels pest control with termites or rodents in the house. Revenue grew 10% a year in the financial crisis and 12% in 2020, and adjusted EBITDA margins have risen to 23%. With 13% of a fragmented US market, it keeps taking share through acquisitions, operating leverage and pricing power. The catch: the stock isn't cheap. x.comÂ
Rollins' multiple broke before its business did, easing the old valuation objection. Forward P/E fell from about 48x to 28-29x while 2027 EPS estimates fell only 6-8% after a Q2 reset in residential brands. Pest control is a route-density game; if density, pricing and bolt-ons compound EPS ~10%, a low-$60s to low-$70s stock by 2032 means 13-17% a year from ~$33. The next two quarters decide it, so watch for organic growth near 7% with recovering margins. 25x, about $32, is the bear-case floor. … Show more
Rollins' slowing organic growth puts both its earnings expectations and premium multiple at risk. Guidance fell from 7-8% to 4-6%, the quarter delivered 4.4%, and growth was 8.5% two years ago. A still-growing business can be repriced when earnings miss the model and investors pay less for each dollar earned. x.comÂ
Nothing is wrong with Rollins' pest control business, even though the stock is down nearly 50% on the year; its fundamentals keep going up and to the right. Multiple contraction from around 50x earnings is one reason for the drop. x.com x.comÂ
Rentokil remains cheap, though cheapness is not a thesis after organic growth decelerated and it pulled its 2027 margin target to reinvest. It trades at 16x 2026 and 14.5x 2027 earnings, organic growth should likely improve on the back of that reinvestment, and the commercial focus is good. The quarter was worse for Rollins than for Rentokil. x.comÂ
Rollins still looks expensive for a pest control company at about 29x earnings and 26x forward, even after falling from a stupidly expensive 65x. @DudeWhoInvests notes the stock is down nearly 50% this year while fundamentals kept rising. x.comÂ
Ongoing LLM pressure on lead generation and private-equity competition make Rollins look expensive. Guidance was cut for a second straight quarter, with implied fourth-quarter residential growth potentially negative. A price closer to $25 looks like an opportunity to scale back into a short. x.comÂ
Rollins is spending more just to stand still, so a ~50% drop does not make it cheap. With ~15-20% blended churn, 5% growth needs about 20% new customers, three in four just refilling the base. Sales and marketing per $1 of organic revenue added rose from $2.07 in FY25 to $2.37 in H1 2026, effectively maintenance capex. Q2 cut organic growth guidance to at least 6% and incremental margin to at least 10% versus a 30%+ target. AI search, an FTC non-compete ban and staff turnover add headwinds. … Show more
Rollins has fallen far faster than seemed believable. x.comÂ
Rollins is expensive against its cash earnings. At $30.16 it trades at 18x cash earnings and 16x next year's, while the industry usually gets 12x. Fair value sits at $19.63 to $24.98, about 12x next year's cash earnings, so the price is 21% above the high end. This is a valuation read only, off reported earnings and revenue estimates, with no fundamental work. x.comÂ
