D invests 🏴󠁧󠁢󠁷󠁬󠁳󠁿 🦥

$ROL Rollins is getting a lot of attention after hitting a 52-week low. We haven't analyzed the business, though we know it's high quality. Our back-of-the-envelope valuation is something like this. If we acquired the entire business, we'd have to pay $14.6b + $1b in net debt. LTM FCF was $620m, implying a c.4% yield. The business grows at mid to high single digits and is quite resilient, so we'd expect it to continue to exist 10 years from today. Assuming a 6/7% annual growth rate in FCF and a 1% buyback yield, that's about a 7% FCF/share growth rate, which is roughly a double in 10 years, so $1.24b by year 10, equating to an 8.5% yield. At 20x to 24x FCF, its market cap. would be around $25b to $30b. From the current capitalization, it would be an annual compound rate of 5.5% to 7.5%, plus dividends. For a 15% compound rate, the exit multiple would have to be 48x FCF. We are most definitely missing the core of the thesis. Again, we haven't done any reasonably decent DD. Unless there's a reacceleration in growth and buybacks of which we're unaware, at least at first sight, the business does not seem to be screaming bargain.