Could Rollins' (ROL) Recurring Revenue Model Unlock New Growth in an Under-Penetrated Market?

• Earlier this week, JPMorgan initiated coverage on Rollins, the parent company of Orkin, highlighting its resilient business model and strong recurring revenue stream in the pest control industry.
• An important takeaway is the positive view on Rollins' growth potential due to under-penetration in the US pest control market and the company's focus on recurring service contracts.
• We’ll explore how JPMorgan’s emphasis on recurring revenue and industry growth may influence Rollins’ overall investment narrative.

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Rollins Investment Narrative Recap

To be a Rollins shareholder, you need to believe in the company's long-term ability to generate stable, recurring revenues in a large, under-penetrated US pest control market. The recent coverage from JPMorgan spotlighted Rollins’ resilient model and highlighted potential for continued growth, though it does not alter the main short-term catalyst, execution on acquisitions, nor does it significantly change the existing risks of higher operating expenses or macroeconomic impacts on demand.

Among recent updates, Rollins’ acquisition of Saela Pest Control stands out, as it is expected to contribute US$45 million to US$50 million in revenue for 2025 and be accretive to earnings, aligning directly with the catalysts for further expanding recurring revenue and capitalizing on industry growth. Continued attention to efficient integration and maintaining margin stability will remain key to unlocking these opportunities.

However, contrasting all this optimism, investors should be aware that increased fleet and operating costs could still threaten the company’s margins if...

Read the full narrative on Rollins (it's free!)

Rollins' outlook calls for $4.6 billion in revenue and $686.0 million in earnings by 2028. This scenario is based on an 8.8% annual revenue growth rate and a $196.7 million increase in earnings from the current $489.3 million.

Uncover how Rollins' forecasts yield a $59.67 fair value, in line with its current price.

Exploring Other Perspectives

Fair value opinions from five Simply Wall St Community members span a wide spectrum, from as low as US$14.40 to as high as US$72.00. As you review these perspectives, consider how Rollins’ focus on recurring revenue growth may affect its ability to weather market and operational headwinds, and explore what other members see in the company’s future.

Explore 5 other fair value estimates on Rollins - why the stock might be worth as much as 23% more than the current price!

Build Your Own Rollins Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Rollins research is our analysis highlighting 2 key rewards that could impact your investment decision.
• Our free Rollins research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Rollins' overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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