Motley Fool Income Investor
While Home Depot
Today the company served up its third-quarter results. Revenue rose 3%; operating income was flat but matched analyst estimates. The company is on track to earn $0.59 a share this year and an estimated $0.66 next year.
To understand the opportunity, look at the competition. Rollins
ServiceMaster needs to optimize its individual offerings so they produce peer-level performance -- and it's close to doing that with this quarter's 11.8% operating margins. At the same time, it needs to be able to cross-market its other services cost-effectively to existing customers.
ServiceMaster has the luxury of producing enough cash that it can pay an excellent dividend, repurchasing shares ($14 million this quarter) and reducing debt (which, at $808 million, is high at 1.0 times equity).
At 19 times 2005 earnings, ServiceMaster may not look like a bargain. Keeping the stock price high is its 3.5% dividend, its improving balance sheet, and a recent purchase by Berkshire Hathaway
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Fool contributor W.D. Crotty owns stock in Home Depot and Berkshire Hathaway.