The Zhitong Finance App learned that Rollins (ROL.US)'s stock price was sold off on Thursday last Thursday because pest control competitor Rentokil (RTO.US) announced weak results for the third quarter. Analysts have said that this is a buying opportunity.
Among them, Bank of America analyst Jason Haas wrote in a report: “After the Rollins family's second offering and Rentokil's mistakes, we found that Rollins's stock price was particularly attractive. The company's price-earnings ratio was 32 times (the 5-year average price-earnings ratio was 48 times). Wall Street has predicted that organic revenue growth will slow to around 6% by 2024 and beyond.” The analyst gave Rollins a “buy” rating.
Additionally, Bank of America's Haas also believes Rollins will continue to benefit from migration to the South, climate change, increased pest resistance, and people starting to do things for themselves. Haas is also optimistic about Rollins' new management's ability to increase profit margins through price increases and internal improvements.
However, given Rentokil's poor third-quarter earnings, Haas lowered Rollins' price target from $49 to $42.30.
Meanwhile, Royal Bank of Canada (RBC) analyst Ashish Sabadra also believes that the decline in Rollins' stock price has created buying opportunities. Sabadra gave Rollins an “outperform the market” rating, with a target price of $52.
Sabadra wrote in a Thursday report: “We believe Rollins shares were sold off (down 8.35% and the S&P 500 index fell 85 basis points) due to Rentokil's weak performance, which created an attractive medium- to long-term buying opportunity.” “Website data traffic shows that despite weak performance in September, the third quarter results were stable, and management's intra-quarter comments were positive. Although it is difficult to predict quarterly revenue growth, long-term trends and strong execution of pest control services should lead to steady revenue growth over the medium term.”
Finally, Stifel analyst Michael Hoffman also raised Rollins's rating from “hold” to “buy” on Friday.
It's worth mentioning that Rollins will announce its third quarter results on Wednesday and hold a conference call on Thursday, at which time investors will learn more about the company's results.