Investment Research report

Rollins, Inc.

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Research Overview

S&P 500
Consumer Discretionary
Oct 4, 2023

After conducting a forensic financial review of Rollins, Inc. (NYSE: ROL), the second largest pest control service provider in the U.S., Spruce Point believes there are multiple growing long-term macroeconomic and microeconomic issues that are likely to pressure Rollins’ historical growth and margins. Based on our investigation, we estimate a 30% to 40% downside risk, or $21.75 -$25.40 per share.

The report highlights several key concerns with the company, including:

  • Industry competition is increasing with the recent merger of Rentokil and Terminix, the rise of door-to-door sales, a flood of new private equity backed platforms, and bundled home services
  • We believe Rollins has depended heavily on M&A growth, but there is evidence of new challenges with this strategy
  • COVID-19 was a boon for the pest control industry, but now multiple tailwinds are becoming headwinds to Rollins
  • Rollins was recently charged by the SEC for improper earnings management and also changed auditors
  • Multiple new scientific research studies conclude that insect populations are declining globally
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