• Wondering if Rollins at US$65.60 is offering you real value or just a popular pest control name with a rich price tag? This article is built to help you make sense of what you are paying for.
• The stock has returned 3.3% over the last 7 days, 7.5% over 30 days, 11.2% year to date, 32.5% over 1 year, 89.3% over 3 years and 90.4% over 5 years. This naturally raises questions about what is already baked into the current share price.
• Recent coverage of Rollins has largely focused on its position in the pest control industry and ongoing interest from investors who follow long term compounders. This helps explain why the share price performance has stayed on many watchlists. This kind of attention can influence how the market is thinking about quality, growth potential and risk around the stock.
• Despite that backdrop, Rollins currently scores only 0 out of 6 on our valuation checks. Next we will walk through different valuation approaches to see what that means in practice, then finish with an even more holistic way to think about value for this business.

Rollins scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Rollins Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes projections of a company’s future cash flows and discounts them back to today’s dollars to estimate what the entire business might be worth right now.

For Rollins, the model used is a 2 Stage Free Cash Flow to Equity framework, based on cash flow projections. The latest twelve month free cash flow is about $668.3 million. Analysts have provided explicit forecasts for the next few years, and Simply Wall St then extrapolates further, with projected free cash flow reaching $1,172.96 million in 2035.

When all those projected cash flows are discounted back, the model arrives at an estimated intrinsic value of about $50.10 per share. Compared with the current share price of $65.60, the DCF output suggests Rollins is around 30.9% more expensive than this model’s estimate, which classifies it as overvalued on this basis.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Rollins may be overvalued by 30.9%. Discover 51 high quality undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Rollins Price vs Earnings

For profitable companies, the P/E ratio is a useful way to check what you are paying for each dollar of earnings, because it ties the share price directly to the business’s current profit stream.

In simple terms, higher growth expectations and lower perceived risk can justify a higher P/E, while slower expected growth or higher risk usually line up with a lower, more cautious P/E range.

Rollins is currently trading on a P/E of 61.18x. That sits well above the Commercial Services industry average of 25.09x and above the peer group average of 41.68x, so the market is putting a premium price on the company’s earnings.

Simply Wall St’s Fair Ratio for Rollins is 28.72x. This is a proprietary estimate of what the P/E might be based on factors such as earnings growth, profit margins, industry, market cap and key risks. Because it blends these company specific drivers, it can be a more tailored anchor than a simple comparison with peers or a broad industry average.

Set against the current 61.18x P/E, the 28.72x Fair Ratio suggests Rollins shares are pricing in a higher level of optimism than this framework supports.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Rollins Narrative

Earlier we mentioned that there is an even better way to understand valuation. Narratives let you attach your own story about Rollins to the numbers by linking your view on its future revenue, earnings and margins to a forecast, then to a fair value that you can easily compare with today’s price on Simply Wall St’s Community page, where millions of investors share their Narratives that update automatically when new news or earnings arrive. You might see one investor building a more cautious Rollins Narrative around a fair value closer to US$44.00 and another building a more optimistic Narrative closer to US$72.00. That clear gap in fair values can help you decide how your own expectations line up with the current US$65.60 share price and whether that looks closer to your buy, hold or sell line in the sand.

For Rollins however we will make it really easy for you with previews of two leading Rollins Narratives:

Fair value: US$72.00 per share

Implied discount to this narrative: around 8.9% below its fair value estimate at the current US$65.60 share price

Revenue growth assumption: 10.35% a year

• Sees urbanization, tighter health rules and recurring contracts supporting higher long term demand for pest control services.
• Assumes Rollins converts this demand into stronger margins through digital tools, automation and acquisitions, with net profit margin rising to 15.5% by 2028.
• Builds in a premium P/E of 57.3x on forecast 2028 earnings, which is above the current Commercial Services industry P/E of 25.7x.

Fair value: US$64.53 per share

Implied premium to this narrative: around 1.7% above its fair value estimate at the current US$65.60 share price

Revenue growth assumption: 9.02% a year

• Assumes solid but more measured growth, with revenue expected to reach about US$4.6b and earnings of US$686.0m by 2028, on a 50.7x P/E.
• Highlights steady recurring revenue and acquisitions as supports for earnings, but also flags cost pressures, FX moves and M&A execution as key risks.
• Views the current price as close to the consensus fair value of US$58.73, so a lot of the expected progress is already reflected in the share price.

If you want to go further than these snapshots and see how other investors are framing the trade off between quality and price for Rollins, Curious how numbers become stories that shape markets? Explore Community Narratives can give you a broader range of views to test against your own assumptions.

Do you think there's more to the story for Rollins? Head over to our Community to see what others are saying!

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.