Last update on 2024-06-06

Rollins (ROL) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Rollins (ROL) achieves a Piotroski F-Score of 7/9 in 2023. Insightful financial analysis to guide investors.

Short Analysis - Piotroski Score: 7

We're running Rollins (ROL) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Rollins, under Piotroski's scoring system, scored a 7 out of 9. First, under profitability criteria, they showed a strong net income amount of $434,957,000 in 2023, positive cash flow of $528.37 million, and an increasing Return on Assets (ROA). Also, their operating cash flow exceeded their net income showing good operational efficiency. On liquidity, Rollins had negative marks with increased leverage from 0.1116 to 0.279, thus increasing financial risk, and a slight decline in current ratio from 0.706 to 0.7051, indicating some room for improvement. However, the company's outstanding shares decreased indicating a share buyback and improved investor confidence. The company's gross margin increased from 0.5147 to 0.5217 signaling better cost management and profitability, and there was a slight increase in the asset turnover ratio from 1.3012 to 1.3029.

Insights for Value Investors Seeking Stable Income

Based on Rollins' Piotroski score of 7 out of 9, the company appears financially strong, especially given their positive profitability markers and efficient cash management. Nonetheless, investors should consider the increased leverage and lower current ratio readings indicating heightened financial risk. Overall, Rollins could be a good investment opportunity due to its robust cash flow, profitability, and operational efficiency improvements, but it's important to further assess the impacts of its rising leverage.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Rollins (ROL)

Company has a positive net income?

The criterion checks if the net income for the firm is positive, which indicates profitability. A positive net income often reflects healthy financial performance, which is essential for long-term sustainability.

For Rollins (ROL) in 2023, the net income stands at $434,957,000, which is indeed positive. Consequently, Rollins scores 1 point for this criterion. Looking at the historical data over the last 20 years, Rollins has consistently demonstrated positive net income figures, showing a pronounced upward trend from $35,761,000 in 2003 to $434,957,000 in 2023. This pattern reflects the company's strong financial health and operational effectiveness, marking a substantial growth trajectory that the market typically views favorably.

Company has a positive cash flow?

The criterion checks if the company's Cash Flow from Operations (CFO) is positive, which indicates the company's ability to generate sufficient cash from its core operations.

For Rollins (ROL), the Cash Flow from Operations (CFO) in 2023 is USD 528.37 million, which is positive. This is a favorable indicator, as it suggests that the company generates ample cash from its operating activities, ensuring liquidity and operational efficiency. Looking at the historical data, ROL has demonstrated a consistent positive trend in its cash flow from operations over the last 20 years, starting from USD 62.02 million in 2003 and increasing steadily to the current level. This consistent uptrend marks strong operational performance and efficient cash management over the years.

Return on Assets (ROA) are growing?

The change in Return on Assets (ROA) from one year to the next is a crucial indicator of a company's efficiency in using its assets to generate earnings. A positive change implies better profitability.

For Rollins (ROL), the ROA has increased from 0.1779 in 2022 to 0.1844 in 2023. This improvement demonstrates an enhanced ability to generate profits from its assets. It is important to note that this positive trend signifies a score of 1 point for this criterion. Analyzing the historical data over the last 20 years, Rollins has shown growth in operational cash flow, which complements the increase in ROA. This trend coincides with the company's long-standing ability to maintain or improve asset efficiency. However, compared to industry standards, where the median ROA is considerably higher (0.4975 in 2023), Rollins' ROA remains relatively low. Even with the recent improvement, the company trails behind its industry peers, indicating there might be underlying factors limiting its asset utilization efficiency. Nonetheless, the positive trend is notable and suggests potential for further growth.

Operating Cashflow are higher than Netincome?

The criterion assesses whether the company's operating cash flow is higher than its net income.

Rollins has an operating cash flow of $528.366 million and a net income of $434.957 million for 2023. Since the operating cash flow exceeds net income, we add 1 point. This indicates a robust cash generation capability, essential for maintaining liquidity and financing future growth. Furthermore, historical data shows consistent growth in operating cash flow from $62.019 million in 2003 to $528.366 million in 2023, while net income also grew from $35.761 million to $434.957 million in the same period. This increasing trend is positive, reflecting strong operational efficiency and cash management.

Liquidity of Rollins (ROL)

Leverage is declining?

Compare the leverage from the prior year to the current year to determine the change in financial risk.

Rollins' leverage has increased from 0.1116 in 2022 to 0.279 in 2023, marking a significant rise in leverage, thereby highlighting increased financial risk. Specifically, the leverage ratio has more than doubled. Though historical trends from the past 20 years reveal generally low leverage values, the notable spikes in recent years (0.2384 in 2019 and the latest 0.279) suggest a departure from historical norms. This increased leverage indicates greater reliance on debt financing in 2023, which will translate into higher interest obligations and potentially more financial vulnerability. Therefore, we allocate 0 points for this criterion, as rising leverage is a risk factor.

Current Ratio is growing?

The current ratio is a critical measure of a company's ability to cover short-term liabilities with short-term assets.

Rollins' current ratio has decreased slightly from 0.706 in 2022 to 0.7051 in 2023. This minor decline suggests that the company may have diminished its liquidity position somewhat, though the change is minimal. Given the industry median current ratio of 0.8169 in 2023, Rollins is below the industry standard, indicating room for improvement in this area. The company's current ratio has fluctuated over the last 20 years, with historical figures as high as 1.2407 in 2015 and as low as 0.4282 in 2008, reflecting varying liquidity conditions over time. Therefore, due to the decrease in 2023 compared to 2022, the score for this criterion is set to 0.

Number of shares not diluted?

Change in Shares Outstanding represents the variation in the number of shares issued and can indicate activities like buybacks, dilution, or financing decisions.

In 2022, Rollins (ROL) had 492,300,000 outstanding shares. By 2023, this figure decreased slightly to 489,949,000, marking a decrease in shares outstanding. This subtle reduction suggests a share buyback initiative, likely aiming to increase shareholder value by reducing the number of shares in circulation. Historically, the number of outstanding shares has shown a declining trend, dropping from 526,315,218 in 2003 to the current 489,949,000 in 2023. Given the positive implication of share buybacks for investors, Rollins earns 1 point for this criterion.

Operating of Rollins (ROL)

Cross Margin is growing?

Change in Gross Margin evaluates a company's ability to manage production costs relative to its sales. It is important because an increasing gross margin indicates improved efficiency or cost management.

The Gross Margin for Rollins (ROL) increased from 0.5147 in 2022 to 0.5217 in 2023, indicating a positive trend. This increment suggests better cost management, translating to higher profitability. Historically, Rollins' gross margin has seen steady growth over the past two decades, exceeding the industry median significantly. Hence, we add 1 point for this criterion.

Asset Turnover Ratio is growing?

The Asset Turnover ratio indicates how efficiently a company uses its assets to generate sales. A higher ratio represents better efficiency. An increase in the ratio is generally viewed positively.

The Asset Turnover for Rollins (ROL) increased marginally from 1.3012 in 2022 to 1.3029 in 2023. This minor rise demonstrates stable asset utilization efficiency, highlighting improved operational effectiveness in employing the company’s asset base to drive revenue growth. Over the last 20 years, the ratio peaked at 2.0291 in 2003, and has shown a declining trend, which could signify either an increase in asset base or issues in maintaining sales growth proportional to assets. The improvement from the previous year adds a positive point to the Piotroski F-score.