Shares of North America's largest pest control provider Rollins (ROL -10.77%) are down 10% as of noon ET on Thursday after the company reported second-quarter earnings yesterday. While sales grew 8% and beat analysts' expectations on the topline, its 7% adjusted earnings-per-share growth came up short. Organic sales rose by 6% in Q2, and management expects a 6% rise in this organic revenue across the full year, with another two or three percentage points added from acquisitions.

Image source: The Motley Fool.

Ultimately, these results are perfectly fine. However, Rollins was previously trading at 33 times free cash flow (FCF) yesterday -- and 45 times FCF in January -- so the market has had the stock priced for perfection, and it hasn't met these lofty expectations so far this year, sending the stock down 34% in 2026.

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NYSE: ROL

Rollins

Today's Change

(-10.77%) $-4.68

Current Price

$38.79

Key Data Points

Market Cap

$21BMarket cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.

Day's Range

$36.82 - $39.78

52wk Range

$36.82 - $66.14

Volume

833.2K

Avg Vol

4.2M

Gross Margin

49.27%

Dividend Yield

1.64%

Making matters worse, a Bank of America analyst lowered their price target on Rollins from $55 to $35 following the results, saying the stock no longer deserves a premium valuation given ongoing pressure on the consumer unit. Wall Street expected Rollins residential organic growth to be 5.4%, and it was only 3.6%. Rollins continues to wrestle with the new world of online search in an era where AI is reimagining how things are found online, temporarily (hopefully) harming Rollins' "top of funnel." While certainly concerning, I think investors would be wise to step back and not panic over these results just yet.

Roughly 75% of Rollins' business comes from recurring service agreements rather than strictly residential sales, which often result from a quick online search after discovering an infestation in their attic. That said, it's important for Rollins to solve its search problems, especially after it recently lost a non-compete case before the Federal Trade Commission.

I still believe in Rollins over the long haul, but the market is probably right in taking away its premium valuation for now. However, this is an elite compounder that has grown sales for 99 straight quarters, operates in a must-have niche, and has a long history of dividend growth. I'll be looking to buy the dip.