Today we’re going to take a look at the well-established Rollins Inc (NYSE:ROL). The company’s stock saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. As a large-cap stock, it seems odd Rollins is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Let’s take a look at Rollins’s outlook and value based on the most recent financial data to see if the opportunity still exists. View our latest analysis for Rollins
Is Rollins still cheap?Rollins appears to be overvalued by 94% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$51.03 on the market compared to my intrinsic value of $26.34. This means that the opportunity to buy Rollins at a good price has disappeared! Another thing to keep in mind is that Rollins’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
What does the future of Rollins look like?Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 37.34% over the next year, the near-term future seems bright for Rollins. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? ROL’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe ROL should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on ROL for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for ROL, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Rollins. You can find everything you need to know about Rollins in the latest infographic research report. If you are no longer interested in Rollins, you can use our free platform to see my list of over 50 other stocks with a high growth potential.