Recession Can't Kill Pests: Under the Radar

"Under the Radar" is a daily feature that uncovers little-known companies worthy of investors' consideration. Check in at 5 every Monday, Wednesday and Friday morning to find out about stocks that tend to beat their bigger brethren.

BOSTON (TheStreet) -- Companies that have achieved profits because of cost cuts are unsafe places to weather a stock-market correction.

The best companies have been able to retain sales momentum during the recession. Here is an under-the-radar pick that posted 12% revenue growth over a one-year period and is doing the dirty work in our struggling economy.

Atlanta-based Rollins(ROL Quote) provides pest- and termite-control services to residential and commercial customers in North America. Its wholly-owned subsidiary, Orkin, squashes bugs from Canada to Panama. And despite the economic black hole, the company posted an impressive second quarter.

Revenue remained stable at $285 million, but net income climbed 12% to $26 million as earnings per share climbed 13% to 26 cents, boosted by a lower share count. The gross margin rose from 49% to 50% and the operating margin grew from 14% to 15%.

Although liquidity is a balance-sheet weakness, evident in a quick ratio of just 0.4, the cash balance has grown 48% to $23 million since the year-earlier quarter. And a debt-to-equity ratio of 0.2 demonstrates modest leverage. We give Rollins a financial strength score of 8.9 out of 10, higher than the "buy"-list average, due to its resilience.

Rollins' stock is down 2% in 2009, underperforming major U.S. indices. The stock isn't particularly cheap. The shares trade at a 2009 price-to-earnings ratio of 23 and a 2010 P/E of 21, reflecting a premium to the overall market. But Rollins is less expensive than environmental-services peers such as Clean Harbors(CLH Quote) and Republic Services(RSG Quote).