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Strong Liquidity Helps Rollins (ROL), Rising Expenses Hurt
Rollins, Inc. (ROL - Free Report) is currently benefiting from its balanced approach to organic and inorganic growth as well as strong liquidity.
ROL earnings and revenues are anticipated to grow 5.9% and 9.6%, respectively, in 2022.
Factors That Augur Well
Rollins’ revenues have witnessed decent growth over the past five years. A balanced approach to organic and inorganic growth is the key to this success. ROL’s organic revenue growth rate is healthy, driven by a strong technician and customer retention. Organic revenues of $693.6 million increased 8.7% year over year in the second quarter of 2022. With the help of strategic acquisitions, ROL continues to expand its global brand recognition, geographical footprint and revenues. ROL completed 39 acquisitions in 2021, 31 in 2020, 30 in 2019, 38 in 2018 and 23 in 2017.
Rollins' current ratio (a measure of liquidity) stood at 0.98 at the end of second-quarter 2022, higher than the prior-year quarter’s 0.73. The gradually increasing current ratio augurs well for ROL. This may imply that the risk of default is less.
A Key Risk
Rollins is witnessing an escalation in costs resulting from acquisitions and IT-related expenses. In addition, ROL’s subsidiaries are embroiled in a number of lawsuits, claims or arbitrations because of which its services are alleged to have caused damage. This is further adding to costs. Hence, ROL's bottom line is likely to remain under pressure going forward.
Zacks Rank and Stocks to Consider
Rollins currently carries 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 are Avis Budget Group, Inc. (CAR - Free Report) , Genpact Limited (G - Free Report) and CRA International, Inc. (CRAI - Free Report) .
Avis Budget sports a Zacks Rank #1 at present. CAR has an earnings growth rate of 108.4% for 2022.
Avis Budget delivered a trailing four-quarter earnings surprise of 69.5%, on average.
Genpact carries a Zacks Rank #2 (Buy) at present. G has a long-term earnings growth expectation of 12.3%.
Genpact delivered a trailing four-quarter earnings surprise of 10.1%, on average.
CRA International flaunts a Zacks Rank of 1, currently. CRAI has a long-term earnings growth expectation of 14.3%.
CRAI delivered a trailing four-quarter earnings surprise of 26%, on average.