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Root (ROOT)
NASDAQ:ROOT
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Root
(NASDAQ:ROOT)
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Rating:58Neutral
Price Target:
$54.00
▲(4.09% Upside)
Action:ReiteratedDate:02/28/26
The score is anchored by improving fundamentals (profitability turnaround and strong recent operating/free cash flow), but is held back by weak technical momentum (below all key moving averages with negative MACD) and questions about earnings stability (gross profit deterioration and guidance for lower 2026 net income as investment ramps).
Positive Factors
Cash Generation
Consistent positive operating and free cash flow in 2024–2025 demonstrates the business now generates cash from core operations, supporting reinvestment, debt servicing and capital buffers. Durable cash conversion (~1.0x FCF to net income) improves financial flexibility through cycles.
Revenue Scale & Profitability Turnaround
Sharp multi-year revenue growth and a return to sustained profitability indicate the model scaled effectively. Higher premium volumes and positive net income suggest improved underwriting discipline and operating leverage that can support continued margin expansion as scale persists.
Distribution & Telematics Partnerships
Rapid channel diversification (partnerships, independent agents, OEM integrations) creates multiple durable distribution pipelines, lowers reliance on a single channel, and embeds telematics into OEM flows—improving customer acquisition reach and long‑term unit economics.
Negative Factors
Underwriting Profit Volatility
A dramatic gross profit swing year‑over‑year signals unstable underwriting economics and sensitivity to loss costs or pricing. Persistent volatility in core underwriting margins undermines earnings durability and requires sustained pricing or reinsurance actions to stabilize results over multiple cycles.
Shrinking Asset Base & Capital Cushion
A materially smaller asset base and meaningful debt relative to equity reduce the company’s capital cushion against underwriting shocks or market stress. Lower absolute assets constrain investment income and the ability to scale while maintaining conservative reserves and solvency buffers.
Planned Higher Acquisition Spend & Lower 2026 Net Income
Management’s plan to ramp acquisition and partnership investment will raise expense ratios and compress near‑term profitability. If growth spending becomes structural, sustained higher acquisition costs plus a modestly elevated loss ratio could weigh on earnings stability beyond a single year.
Root (ROOT) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$804.28M
Dividend YieldN/A
Average Volume (3M)290.63K
Price to Earnings (P/E)23.7
Beta (1Y)1.38
Revenue Growth38.50%
EPS GrowthN/A
CountryUS
Employees1,021
SectorFinancial
Sector Strength70
IndustryInsurance - Property & Casualty
Share Statistics
EPS (TTM)0.31
Shares Outstanding13,702,725
10 Day Avg. Volume319,632
30 Day Avg. Volume290,625
Financial Highlights & Ratios
PEG Ratio1.03
Price to Book (P/B)2.83
Price to Sales (P/S)0.74
P/FCF Ratio5.42
Enterprise Value/Market Cap0.81
Enterprise Value/Revenue0.43
Enterprise Value/Gross Profit1.47
Enterprise Value/Ebitda8.81
Forecast
1Y Price Target
$100.33Price Target Upside93.40% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering3
EPS Forecast (FY)2.4
Revenue Forecast (FY)$1.59B
Root Business Overview & Revenue Model
Company DescriptionRoot, Inc. provides insurance products and services in the United States. The company offers automobile, homeowners, and renters insurance products. The company operates a direct-to-consumer model and serves customers primarily through mobile applications, as well as through its website. Its direct distribution channels also cover digital, media, and referral channels, as well as distribution partners and agencies. The company was incorporated in 2015 and is headquartered in Columbus, Ohio.
How the Company Makes MoneyRoot generates revenue primarily through the sale of auto insurance policies. The company's unique revenue model is centered around usage-based insurance, where customers are assessed through a mobile app that tracks driving behavior. This data-driven approach allows Root to offer personalized premiums, leading to potential cost savings for safe drivers. Key revenue streams include direct premiums written from policyholders, which can fluctuate based on customer acquisition, retention rates, and overall underwriting performance. Additionally, Root may engage in partnerships with automotive and technology companies to enhance its service offerings and expand its customer base, which can contribute to its earnings. The company may also explore ancillary revenue opportunities through value-added services or products related to auto insurance.
Root Earnings Call Summary
Earnings Call Date:Feb 25, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:May 06, 2026
Earnings Call Sentiment Positive
The call emphasized strong growth and durable unit economics: notable revenue (+29%) and net income (+30%) expansion in 2025, record full‑year adjusted EBITDA and healthy capital ($312M unencumbered). Rapid channel diversification (partnerships comprising ~50% of Q4 new writings), OEM telematics integrations, and >20% LTV improvement signal significant strategic progress. Near‑term profitability was tempered by intentional investments in partnerships, R&D and marketing (Q4 net income and operating income declined), and management expects lower full‑year net income in 2026 as investments accelerate and loss ratio normalizes. Overall, the positives (robust growth, capital position, technology and partnership momentum) outweigh the near‑term headwinds tied to measured reinvestment.Q4-2025 Updates
Positive Updates
Strong Revenue and Net Income Growth
Reported 2025 revenue growth of 29% and net income growth of 30%; full-year 2025 net income of $40 million, an increase of $9 million year‑over‑year.
Record Premiums and LTV Improvement
Generated $1.5 billion in premiums in 2025; increased customer LTVs by more than 20% on average over the last 12 months.
Material Premium Growth (GWP / GEP)
Q4 2025 gross written premium (GWP) up 9% YoY and gross earned premium (GEP) up 14% YoY; full‑year 2025 GWP up 16% and GEP up 19%.
Partnerships and Distribution Momentum
Partnerships accounted for nearly 50% of new writings in Q4 and are achieving target profitability and loss ratios; independent agents channel more than tripled year‑over‑year in new writings and is one of the fastest‑growing segments.
Connected Vehicle & OEM Integrations
Announced Toyota/Lexus connected‑vehicle integration (Q4) enabling consenting owners to receive instant telematics quotes; OEM partnerships (including Hyundai, Toyota) and Carvana integration (insurance in 3 clicks / as little as 30 seconds) expand embedded distribution and telematics capabilities.
Operational Improvements & Agent Productivity
Integration with Goosehead reduced quote‑to‑bind time by over 50%, improving agent productivity and customer experience.
Improved Profitability Metrics (Full Year)
Full‑year adjusted EBITDA of $132 million (up from $112 million in 2024) despite targeted growth investments; ended 2025 with $312 million of unencumbered capital and maintained excess capital across insurance subsidiaries.
Accelerating Policies in Force (PIF)
Policies in force growth accelerated in Q4 2025 to more than double the pace of Q4 2024; company expects accelerating annual PIF growth in 2026 driven by distribution expansion.
Negative Updates
Q4 Profitability Pressure From Investments
Q4 2025 net income was $5 million, down $17 million YoY; Q4 operating income $11 million (down $24 million YoY) and Q4 adjusted EBITDA $29 million (down $14 million YoY), with declines attributed to deliberate increases in partnership acquisition and direct R&D/marketing investments.
Expectations of Lower Full‑Year 2026 Net Income
Management expects lower full‑year net income in 2026 due to continued investment and a higher loss ratio (though still expected to remain within the long‑term 60%–65% target range).
Near‑Term Growth Comparability & Seasonality
Q1 2026 year‑over‑year growth expected to be less pronounced due to an exceptionally strong Q1 2025 (tariff‑related pull forward); Q4 experienced a modest increase in loss ratio due to seasonality.
Rising Competitive Pricing Environment
Management acknowledged increased competition and moderating industry pricing that requires continued investment in pricing and distribution to sustain growth and retention.
Potential Expense Ratio Pressure
Planned acceleration of acquisition spending (sales & marketing and other insurance expense) to scale partnerships and direct channels may raise the expense ratio in 2026; management declined to provide a specific combined ratio target and said combined ratio could rise in quarters where growth is prioritized.
Uncertainty in Autonomous Vehicle Loss Trends
Despite OEM data access, management noted that loss costs for many autonomous/ADAS vehicles have recently risen and that pricing for AV cohorts requires nuanced, model‑specific approaches; no material long‑term premium reductions have been realized yet.
Company Guidance
Management guided to accelerating annual policies‑in‑force (PIF) growth in 2026—fuelled by expanded distribution (partnerships, independent agents and geographic expansion)—with sequential PIF gains expected in Q1 (tax‑refund season) though Q1 2026 YoY growth will be less pronounced than Q1 2025 (tariff pull‑forward); they expect accident‑period loss ratios to improve vs Q4 and to remain within the long‑term target range of 60–65% (albeit modestly higher in 2026), assume a low‑single‑digit net trend for loss‑cost inflation, and plan continued investment that will raise acquisition spend (sales & marketing and other insurance expense) while keeping fixed tech/G&A roughly flat as a percent of GEP—consequently, full‑year 2026 net income is expected to be lower than 2025. For context, Root finished 2025 with $1.5B of premiums and $312M of unencumbered capital; 2025 full‑year GWP +16% and GEP +19% (Q4 GWP +9%, GEP +14%), full‑year net income $40M (Q4 net income $5M), operating income $62M (Q4 $11M) and adjusted EBITDA $132M (Q4 $29M); management also noted ~80% U.S. population coverage today with a goal to enter all contiguous states by end‑2027, partnerships comprising nearly half of Q4 new writings and independent‑agent new writings having more than tripled YoY.Root Financial Statement Overview
Summary
Clear turnaround with rapid revenue growth and a return to profitability in 2024–2025, supported by strong operating/free cash flow. However, earnings durability is a key risk given the sharp swing in gross profit (strongly positive in 2024 to slightly negative in 2025) and a much smaller 2025 asset base that can reduce cushion versus shocks.Income Statement
Revenue has accelerated sharply (from $455M in 2023 to $1.176B in 2024 and $1.517B in 2025), and profitability has improved meaningfully versus the heavy losses in 2020–2023. Net income turned positive in 2024 ($30.9M) and improved further in 2025 ($37.2M), supporting a modest net margin (~2.5%). The key weakness is volatility in core profitability: gross profit swung from strongly positive in 2024 ($337.1M) to slightly negative in 2025 (-$4.1M), indicating pressure in underwriting economics and/or cost of revenue that could challenge durability of earnings.62
Positive
Balance Sheet
Leverage has improved versus the peak risk year (debt-to-equity of ~1.80x in 2023 down to ~0.70x in 2025), and equity has rebuilt to $284.3M in 2025 from $203.7M in 2024, supporting a positive return on equity (~13.1%) after deeply negative levels in 2021–2023. Offsetting this, total assets declined significantly from $1.496B (2024) to $616M (2025), and while leverage is better, the company still carries meaningful debt ($200.3M) relative to its equity base—leaving less room for adverse underwriting/capital shocks than higher-capitalized peers.58
Neutral
Cash Flow
Cash generation is a clear strength: operating cash flow remained strongly positive in both 2024 ($195.7M) and 2025 ($206.5M), and free cash flow was similarly robust (2025 free cash flow of $206.5M). Free cash flow growth remained positive in both 2024 and 2025, and free cash flow was well-supported relative to net income (about 0.94x in 2024 and ~1.0x in 2025), suggesting earnings quality has improved. The main weakness is historical volatility—cash flow was materially negative in 2020–2023—so the durability of the current run-rate still needs to be proven through a full cycle.73
Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 1.52B | 1.18B | 455.00M | 310.80M | 345.40M |
| Gross Profit | 592.90M | 337.10M | 76.10M | -32.20M | -51.90M |
| EBITDA | 73.60M | 88.00M | -88.70M | -249.30M | -484.50M |
| Net Income | 40.30M | 30.90M | -147.40M | -297.70M | -521.10M |
Balance Sheet | |||||
| Total Assets | 1.54B | 1.50B | 1.35B | 1.31B | 1.32B |
| Cash, Cash Equivalents and Short-Term Investments | 262.80M | 906.10M | 845.50M | 890.90M | 835.90M |
| Total Debt | 200.30M | 200.10M | 299.00M | 295.40M | 23.90M |
| Total Liabilities | 1.14B | 1.29B | 1.18B | 1.04B | 782.90M |
| Stockholders Equity | 396.30M | 203.70M | 165.70M | 277.10M | 536.40M |
Cash Flow | |||||
| Free Cash Flow | 206.50M | 183.90M | -43.00M | -220.70M | -414.60M |
| Operating Cash Flow | 206.50M | 195.70M | -33.60M | -210.60M | -403.40M |
| Investing Cash Flow | -91.70M | -154.40M | -45.70M | -16.60M | 76.90M |
| Financing Cash Flow | -25.20M | -120.70M | -4.10M | 283.30M | -80.30M |
Root Technical Analysis
Negative
51.88
Price Trends
67.99
Negative
74.16
Negative
94.91
Negative
Market Momentum
-2.74
Negative
41.54
Neutral
55.25
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ROOT, the sentiment is Negative. The current price of 51.88 is below the 20-day moving average (MA) of 60.24, below the 50-day MA of 67.99, and below the 200-day MA of 94.91, indicating a bearish trend. The MACD of -2.74 indicates Negative momentum. The RSI at 41.54 is Neutral, neither overbought nor oversold. The STOCH value of 55.25 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ROOT.
Root Risk Analysis
Root disclosed 64 risk factors in its most recent earnings report. Root reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Root Peers Comparison
UnderperformOutperform
Sector (68)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
79 Outperform | $2.29B | 7.76 | 40.02% | 0.82% | 8.71% | 17.26% | |
76 Outperform | $1.16B | 11.53 | 9.97% | 4.59% | 13.35% | 16.56% | |
73 Outperform | $2.36B | 1.65 | 52.29% | ― | ― | ― | |
68 Neutral | $2.12B | 17.55 | 7.08% | 2.88% | 16.22% | 69.80% | |
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% | |
58 Neutral | $804.28M | 23.74 | 11.32% | ― | 38.50% | ― | |
50 Neutral | $3.95B | -23.05 | -29.37% | ― | 30.53% | 21.82% |
* Financial Sector Average
ROOT
Root
51.88
-83.29
-61.62%
SAFT
Safety Insurance Group
77.63
5.03
6.93%
STC
Stewart Information Services
70.99
1.84
2.67%
HCI
HCI Group
176.42
46.06
35.33%
LMND
Lemonade
51.74
15.39
42.34%
SLDE
Slide Insurance Holdings, Inc.
19.00
-4.30
-18.45%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.