Rollins: An Unlikely 128-Bagger in Pest Control Investment

Leading pest control services company Rollins (NYSE: ROL) has achieved total returns (including reinvested dividends) of 12,700% since the year 2000, making it a 128-bagger. This means that every dollar invested in Rollins 25 years ago would have grown into $128 today.

Typically, investors associate such high returns with flashy tech stocks like Nvidia, Palantir Technologies, or even Bitcoin. However, Rollins exemplifies that robust investment opportunities can exist in everyday sectors, reminding investors to look beyond the surface.

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This article aims not only to spotlight Rollins’ remarkable past performance but also to discuss its promising future potential. Here are four reasons why Rollins stands out as a strong yet underrated S&P 500 dividend growth stock.

1. Industry Dominance

Rollins has outperformed the market with non-discretionary sales positioning it as a reliable investment. By protecting customers against pests like rodents and termites, the company has seen its sales grow nearly sixfold since 2000, becoming the top operator in its niche.

Brand strength significantly contributes to Rollins’ success. Its flagship brand, Orkin, holds the highest brand awareness in U.S. pest control. With 50% of customers approaching Orkin directly after research, this brand recognition has helped Rollins achieve a revenue growth rate of 8% over the past 15 years, outpacing the industry average of 3%.

Furthermore, long-term trends such as the increased demand for do-it-for-me services, higher pet ownership, and stricter sanitation regulations are expected to boost future growth for Rollins.

Image Source: Getty Images.

2. Proven Acquisition Strategy

Rollins’ strong track record of acquisitions has significantly influenced its 128-bagger status. The company has acquired hundreds of smaller pest control firms, completing 44 tuck-in deals in 2024 alone. Since 2015, Rollins has allocated nearly half of its free cash flow (FCF) for acquisitions.

ROL Free Cash Flow data by YCharts.

By targeting profitable businesses that complement its operations, Rollins is reshaping a fragmented industry. With over half of pest control industry revenues still deriving from small operators with annual sales under $50 million, Rollins’ acquisitive strategy shows no signs of slowing.

In its recent fourth-quarter results announcement, Rollins noted it has received investment-grade ratings from Fitch Ratings and S&P Global, enhancing its access to low-cost credit and boosting its merger and acquisition capabilities.

3. Growing Margins and Dividends

Rollins’ strong acquisition potential excites investors, as the company consistently integrates purchases while enhancing profitability. The profitability metrics for Rollins over the last two decades reflect this trend.

ROL Operating and Owners’ Cash Profits Margins (TTM) data by YCharts.

As a large-scale entity, each new acquisition typically enhances Rollins’ profitability. The company has achieved an impressive cash return on invested capital (ROIC) of 34% since 2005, placing it within the top 10% of S&P 500 stocks—a clear indicator of future growth potential.

Due to rising profitability, Rollins has maintained respectable dividends, currently yielding 1.2%. An investor who purchased $1,000 worth of Rollins stock in 2000 would now receive $750 annually in dividends, benefitting from increases over two decades.

4. Premium Valuation Status

One challenge potential investors face when considering Rollins stock is its premium price-to-earnings (P/E) ratio of 55. However, given that Rollins often generates higher free cash flow than net income, examining its price-to-free cash flow (P/FCF) ratio of 44 is more relevant.

While the P/FCF ratio surpasses the S&P 500 average by about 50%, Rollins has maintained this valuation level for a decade, outpacing market returns.

ROL Price to Free Cash Flow data by YCharts.

In summary, purchasing Rollins shares often means paying a premium for a premium business. Notably, the company’s essential services and consistent historical sales growth of 8% to 10% annually provide a convincing justification for this premium over the long term.

As the pest control sector remains competitive and Rollins is well-positioned to expand through acquisitions, I am excited to maintain my investment in this promising S&P 500 dividend growth stock.

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*Stock Advisor returns as of March 3, 2025

Josh Kohn-Lindquist holds positions in Nvidia and Rollins. The Motley Fool also holds positions in and recommends Bitcoin, Nvidia, Palantir Technologies, Rollins, and S&P Global. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of Nasdaq, Inc.