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A prudent investment decision involves buying stocks that have solid prospects and selling those that carry risks. At times, it is rational to hold certain stocks that have enough potential but are weighed down by tough market conditions.
We believe that Rollins, Inc. (NYSE:ROL) with Growth Score of A and a market cap of $10.8 billion, is a stock that investors should retain in their portfolio.
Factors That Bode Well
Demand environment for this building maintenance servicer remains in good shape driven by a strong economy, rising consumer spending and decent construction activity in commercial and industrial sectors.
The company’s revenue growth rate is healthy driven by strong employee and customer retention. Enhancing benefits are expected to improve retentions for the upcoming years. The Clark and Northwest Pest Control acquisitions have started making significant contributions to Rollin’s revenues that improved 9.1% year over year in the second quarter of 2019.
Rollins, Inc. Revenue (TTM)
Rollins is in excellent financial health, with plenty of ongoing cash generation and no debt. It has a consistent track record of rewarding shareholders through dividends.
Last Words
Despite riding on significant growth prospects, Rollins is not free from overhangs. The company is witnessing escalation in costs resulting from acquisitions, lease expenses, IT and advertising. Moreover, its policy of acquiring a large number of companies could result in some integration risks. Nevertheless, we believe that favorable growth dynamics and a strong financial profile bode well for Rollins.
Zacks Rank and Stocks to Consider
Currently, Rollins has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the broader Zacks Business Services sector include ICF International (NASDAQ:ICFI) , Booz Allen Hamilton (NYSE:BAH) and Charles River Associates (NASDAQ:CRAI) , each carrying a Zacks Rank #2 (Buy).
The long-term expected EPS (three to five years) growth rate for ICF, Booz Allen and Charles River is 10%, 13% and 13%, respectively.
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