Rollins Reports Resilient Q4 Growth but High Valuation and Insider Selling Highlight Risks

What happened

Rollins posted 9.7% revenue growth in Q4 2025, slightly missing expectations due to weather disruptions, yet maintains double-digit growth guidance for 2026 on strong recurring revenues and acquisition-driven expansion. The company's fundamentals remain robust with a solid balance sheet, sub-1x leverage, and high free cash flow conversion, supporting its reputation as a quality compounder. However, shares trade near $63 at historically high multiples of ~59x trailing EPS and ~41x EV/EBITDA, pricing in sustained outperformance with minimal room for error. Recent large insider sales and a secondary offering in November 2025, priced at a discount, signal that major shareholders see limited upside at these elevated levels. Despite operational strength, the valuation embeds aggressive growth assumptions, making the stock vulnerable to any normalization in organic growth or margins.

Implication

The high valuation multiples imply that Rollins must consistently deliver mid-to-high single-digit organic growth and margin expansion to justify its price, leaving no margin of safety for missteps. Any deviation, such as the weather-impacted Q4 miss, could trigger a re-rating, especially given the crowded long narrative and recent technical weakness. The company's reliance on acquisitions for double-digit growth adds integration risk and may dilute organic performance metrics over time. With insider selling indicating skepticism from those closest to the business, and balance sheet flexibility being used for share repurchases at rich valuations, capital allocation decisions are questionable. Therefore, patience for a pullback to the mid-$50s is prudent to gain a valuation cushion against potential operational headwinds.

Thesis delta

The new article confirms the DeepValue report's assessment that Rollins is overvalued despite strong fundamentals, with the slight Q4 revenue miss due to weather highlighting short-term vulnerabilities. This reinforces the existing 'POTENTIAL SELL' rating, as the valuation remains stretched and insider activity underscores caution, but does not materially alter the long-term thesis of a high-quality compounder facing execution risks.