The best investments aren't always the most glamorous companies. Sure, Apple(AAPL) - Get Report is a great stock that is also probably the most talked-about corporation in the world. But companies that establish a strong track record helping people address the mundane tasks of everyday life should also find a place in your growth portfolio. In fact, it's a great way to guarantee your profits over the long term.
ServiceMaster Global Holdings (SERV) - Get Report is a leading provider of essential services for homeowners, operating through a service network of more than 8,000 company-owned locations and franchise agreements. The Memphis-based company's portfolio of well-known brands includes American Home Shield (home warranties), AmeriSpec (home inspections), Merry Maids (residential cleaning), ServiceMaster Restore (disaster restoration) and Terminix (termite and pest control).
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Demand for ServiceMaster's services and products is rising. The National Association of Realtors' pending home sales index, which tracks contract signings for purchases of previously owned homes, increased by 1.3% to 111.3 in July. Economists surveyed by the Wall Street Journal had expected only a 0.7% rise.
June of this year marked 50 consecutive months of national home price appreciation, up 33% from the bottom that was hit in 2012.
The upward trend in residential sales has been good for companies like Home Depot(HD) - Get Report and ServiceMaster, which recently reported a year-over-year revenue increase of 4% for the second quarter.
This increase was driven primarily by two developments: organic growth of 8% at American Home Shield, and the impact of ServiceMaster's acquisition of Alterra Pest Control in November 2015. ServiceMaster's Terminix brand was already the leader in the pest extermination sector, and the Alterra deal adds to the company's market share.
National publicity about the Zika virus has raised awareness about the importance of controlling mosquitoes and mosquito-borne illness. During the recent flooding in Louisiana, Terminix donating 7,700 cans of its Allclear Mosquito Bait & Kill solution to the American Red Cross flood relief effort, plus an additional 2,500 cans to Louisiana residents via door-to-door delivery.
The company's second-quarter 2016 adjusted net income was $93 million, or $0.67 per share, versus $82 million, or $0.60 per share, for the same period in 2015.
The firm's margins continue to improve as it streamlines operations-for instance, by converting the Merry Maids branches to franchises. The added revenue from American Home Shield and Terminix is allowing the company to invest more in marketing its other brands.
Revenue in fiscal 2016 is expected to be in the neighborhood of $2.8 billion, for an increase of 5% to 6% compared to 2015. Despite its superb balance sheet, the stock price is toward the lower bound of its 52-week range, indicating room for appreciation.
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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.