SERV – Market expectations are for Uniform ROA improvement, but management appears concerned about damage claims, termite renewals, and their performance

• ServiceMaster Global Holdings, Inc. (SERV:USA) currently trades near recent averages relative to UAFRS-based (Uniform) Earnings, with a 19.4x Uniform P/E. At these levels, markets have bullish expectations for the firm, but management appears concerned about non-litigation damage claims, termite renewal reductions, and their initiatives to improve performance
• Specifically, management may lack confidence in their ability to improve margins, sustain acquisition revenue, and settle non-litigation claims. Moreover, they may be downplaying concerns about Formosan termite renewal reductions, and they may be exaggerating the strength of their base business cash generation and their sales functions. Furthermore, they may lack confidence in their ability to expand into the European market and implement initiatives to improve performance and customer service. Management may also be concerned about the impact of pricing increases on volume declines and about the sustainability of favorable conditions in debt markets.