A Look At The Fair Value Of Rollins, Inc. (NYSE:ROL)

Rollins, Inc. (NYSE:ROL) is a leading provider of pest and wildlife control services, operating in the United States and internationally. The company has a strong track record of earnings growth and dividend payouts, making it an attractive investment option for many investors. However, the question remains: is Rollins currently undervalued, fairly valued, or overvalued? Let's take a closer look at the company's valuation metrics, earnings growth, and dividend payouts to determine its fair value.

1. Valuation Metrics: Rollins' current valuation can be compared to its historical averages and industry peers using various metrics such as Price-to-Earnings (P/E) ratio, Price-to-Sales (P/S) ratio, and Price-to-Book (P/B) ratio.

- Price-to-Earnings (P/E) ratio: Rollins' current P/E ratio is 48.13, which is higher than its 5-year average P/E ratio of 38.75. This suggests that Rollins is currently trading at a premium compared to its historical averages. However, it is important to note that Rollins' P/E ratio is still lower than some of its industry peers, such as Terminix Global Holdings (TMX) with a P/E ratio of 54.45 and Rentokil Initial (RTO.L) with a P/E ratio of 52.75.
- Price-to-Sales (P/S) ratio: Rollins' current P/S ratio is 6.83, which is higher than its 5-year average P/S ratio of 5.74. This indicates that Rollins is currently trading at a premium compared to its historical averages. However, Rollins' P/S ratio is still lower than some of its industry peers, such as Terminix Global Holdings (TMX) with a P/S ratio of 7.54 and Rentokil Initial (RTO.L) with a P/S ratio of 7.25.
- Price-to-Book (P/B) ratio: Rollins' current P/B ratio is 17.16, which is higher than its 5-year average P/B ratio of 14.27. This suggests that Rollins is currently trading at a premium compared to its historical averages. However, Rollins' P/B ratio is still lower than some of its industry peers, such as Terminix Global Holdings (TMX) with a P/B ratio of 20.25 and Rentokil Initial (RTO.L) with a P/B ratio of 18.75.

2. Earnings Growth: Rollins' earnings growth rate has been impressive compared to its industry peers over the past five years. The company's earnings per share (EPS) have grown at a compound annual growth rate (CAGR) of 16.1% over the past five years, significantly outpacing the industry average. This growth can be attributed to Rollins' strong operational performance, strategic acquisitions, and effective cost management. For instance, Rollins' revenue growth rate of 0.09 in the most recent quarter is lower than the industry average, but the company's earnings growth rate of 10% for the current year and 10.5% for the next year is higher than the industry average. Additionally, Rollins' forward P/E ratio of 41.55539 is lower than the industry average, indicating that the company's stock is relatively undervalued compared to its peers.

3. Dividend Payout: Rollins' dividend payout is another important factor in determining its fair value. The company has a history of paying consistent dividends to its shareholders, with a dividend growth rate of 13.89% over the past year. This demonstrates Rollins' commitment to returning capital to shareholders and provides a steady income stream for investors. The company's current dividend yield is 1.41%, which is relatively low compared to other stocks in the consumer cyclical sector. However, Rollins' strong earnings growth and dividend payout history suggest that the company has the potential to increase its dividend yield in the future.

In conclusion, Rollins' current valuation is higher than its historical averages but lower than some of its industry peers. This suggests that Rollins is currently trading at a premium compared to its historical averages but is still relatively undervalued compared to some of its industry peers. However, Rollins' strong earnings growth and dividend payout history suggest that the company has the potential to create value for shareholders in the long run. Investors should carefully consider the company's fundamentals and valuation before making an investment decision.