Rollins Inc (NYSE:ROL) saw a decent share price growth in the teens level on the NYSE over the last few months. 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 examine Rollins’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. View our latest analysis for Rollins
What’s the opportunity in Rollins?
Rollins is currently overpriced based on my relative valuation model. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Rollins’s ratio of 60.48x is above its peer average of 19.97x, which suggests the stock is overvalued compared to the commercial services industry. Furthermore, Rollins’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What kind of growth will Rollins generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. 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? It seems like the market has well and truly priced in Rollins’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe Rollins 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 tabs on Rollins for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for Rollins, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.