Canaccord Genuity has adjusted its valuation on Rollins Inc. (NYSE: ROL), lowering the firm's price target to $52.00 from $55.00 while retaining a Hold recommendation following the company’s fiscal fourth-quarter results, which underwhelmed relative to market expectations.
The research note arrives against a backdrop of valuation metrics that signal elevated multiples: Rollins is trading at a price-to-earnings ratio of 54.45 and carries a PEG ratio of 4.02, metrics that Canaccord and market data suggest may imply the stock is priced for continued strong growth.
On the top line, Rollins’ quarterly sales landed roughly 2% below consensus estimates, though the figure was about 1% higher than Canaccord’s internal projection. The company’s recurring business - which accounts for more than 80% of total revenue - posted organic growth of over 7% in the period, while one-time business volume declined by 3%, a drop management attributed to inclement weather.
For the trailing twelve months, Rollins sustained overall revenue growth of 10.99%, with total revenue reaching $3.76 billion.
Profitability measures, however, were weaker than hoped. Adjusted EBITDA missed Canaccord’s forecast by about 4% and trailed consensus estimates by roughly 8%. Year-over-year, adjusted EBITDA margin contracted by 60 basis points. Canaccord cited timing of gains on vehicle disposals and a lack of labor leverage resulting from the lower one-time revenue volume as drivers of the margin compression.
Measured on a trailing twelve-month basis, Rollins’ EBITDA stands at $850.81 million, and the company is trading at an enterprise value-to-EBITDA multiple of 34.84.
Incremental EBITDA margins in the fourth quarter were reported at 15.7%, materially below the company’s medium-term target range of 30% to 35%. That shortfall in incremental margins was a key factor behind the downward pressure on the stock; Rollins shares fell 11% while the S&P 500 declined 1% over the comparable period.
Canaccord said it could adopt a more constructive stance on the name if Rollins either demonstrates an acceleration in revenue growth or shows consistent progress toward achieving its targeted incremental margins.
In the company’s formal fourth-quarter earnings disclosure for fiscal 2025, Rollins reported earnings per share of $0.25, missing the forecasted $0.26. Quarterly revenue was $913 million, below the anticipated $926.81 million. The earnings and revenue shortfalls were notable developments for investors and analysts watching the company, though the report did not include any announcements of mergers or acquisitions.
Analysts across firms continue to monitor Rollins’ operating performance; the recent results and margins gap have yet to produce a wave of publicly reported rating changes, according to available commentary.
Context and next steps - The guidance in Canaccord’s note indicates a conditional path to a more favorable outlook: demonstrable improvement in revenue momentum or consistent delivery on incremental margin targets. In the absence of those developments, the firm appears to favor a cautious stance at the revised $52 price objective.