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Root
(NASDAQ:ROOT)
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Rating:71Outperform
Price Target:
$62.00
▲(6.99% Upside)
Action:Reiterated
Date:08/06/26
ROOT scores well on fundamentals, led by sustained profitability, strong cash generation, and improved leverage versus prior stressed periods. The earnings call supports the quality of profits via underwriting discipline and prudent capital actions, but near-term growth and pricing pressure temper the outlook. Technical signals are constructive but not strongly bullish given the stock remains below the 200-day moving average, while valuation is reasonable on P/E with no dividend support.
Positive Factors
Sustained Profitability
Positive earnings and a roughly 92% combined ratio indicate Root has moved beyond its loss-making period. Continued underwriting discipline and expense control can support durable profitability, even as the company balances growth with risk selection.
Negative Factors
Margin Compression
Falling gross margin suggests that claims, pricing or underwriting economics are becoming less favorable despite revenue growth. If this trend persists, scale benefits may not translate proportionally into earnings and could limit the durability of recent profitability.
Read all positive and negative factors
Positive Factors
Negative Factors
Sustained Profitability
Positive earnings and a roughly 92% combined ratio indicate Root has moved beyond its loss-making period. Continued underwriting discipline and expense control can support durable profitability, even as the company balances growth with risk selection.
Read all positive factors
Root (ROOT) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$864.02M
Dividend YieldN/A
Average Volume (3M)237.03K
Price to Earnings (P/E)15.0
Beta (1Y)0.89
Revenue Growth14.86%
EPS Growth-30.59%
CountryUS
Employees1,256
SectorFinancial
Sector Strength70
IndustryInsurance - Property & Casualty
Share Statistics
EPS (TTM)3.71
Shares Outstanding13,687,016
10 Day Avg. Volume194,997
30 Day Avg. Volume237,030
Financial Highlights & Ratios
PEG Ratio1.07
Price to Book (P/B)2.83
Price to Sales (P/S)0.74
P/FCF Ratio5.82
Enterprise Value/Market Cap<0.01
Enterprise Value/Revenue<0.01
Enterprise Value/Gross Profit<0.01
Enterprise Value/Ebitda<0.01
Forecast
1Y Price Target
$62.75Price Target Upside8.28% Upside
Rating ConsensusHold
Number of Analyst Covering4
EPS Forecast (FY)4.24
Revenue Forecast (FY)$1.54B
Root Business Overview & Revenue Model
Company Description
Root, Inc. operates within the United States, concentrating on delivering a range of insurance solutions, including policies for automobiles, residential properties, and rental occupancy. The company employs a direct-to-consumer business model, pr...
How the Company Makes Money
Root makes money primarily by underwriting and selling personal lines insurance policies (historically led by auto insurance, with additional offerings such as renters). Its core revenue stream is insurance premiums earned from policyholders over ...
Root Earnings Call Summary
Earnings Call Date:Aug 05, 2026
(Q2-2026)
| % Change Since: |
Next Earnings Date:Nov 11, 2026
Earnings Call Sentiment Positive
The call emphasized durable profitability, underwriting strength (improved combined ratio), disciplined capital allocation (debt refinancing, share repurchases) and continued investments in AI, pricing models, distribution and R&D. These positive fundamentals were tempered by near-term growth headwinds: sequential PIF decline, competitive pricing pressure, modest declines in gross written/earned premium, a small investment impairment and guidance for higher seasonal loss ratios in H2. Management framed the weaker growth as tactical and cyclical while highlighting long-term levers (state expansion, partnerships, new pricing model) that should drive re-acceleration.Positive Updates
Profitability and Strong Returns
Net income increased 15% year-over-year to $25 million, generating approximately a 31% annualized return on equity, demonstrating meaningful profitability.
Negative Updates
Muted Near-Term Growth and Sequential PIF Decline
Policies in force declined sequentially for the quarter (runoff of Q1 tax season cohort) and management expects 2026 year-end PIF to be relatively flat year-over-year if the current competitive environment persists—i.e., growth is likely muted in the near term.
Read all updates
Q2-2026 Updates
Positive
Negative
Profitability and Strong Returns
Net income increased 15% year-over-year to $25 million, generating approximately a 31% annualized return on equity, demonstrating meaningful profitability.
Read all positive updates
Company Guidance
Root's guidance emphasized disciplined, profitability‑focused growth: if the current competitive direct environment persists, management expects 2026 policies in force to be relatively flat year‑over‑year (Q2 PIF 484,000, +6% YoY; year‑end 2025 ≈482k) and anticipates the normal H2 seasonality of higher loss ratios (renewal loss ratio in the period ~54%); they plan ≈$10M of R&D investment in H2 to test new acquisition channels and AI, will roll out a next‑gen pricing model state‑by‑state in Q4 (prior model lifted customer LTVs >20%) and see modest rate flexibility in low single digits with roughly a 3% indicated overpricing headroom. Key financial/context metrics cited include revenue $389M (+2% YoY), gross written premium $340M (‑2% YoY), gross earned premium $368M (‑1% YoY), net income $25M (+15% YoY) with ~31% annualized ROE, underwriting discipline with a ~92% net combined ratio (92.1% reported), net expense ratio ~26% (net loss & LAE ~66%), expected fixed expense (G&A + tech/dev) of ~10–11% of gross earned premium in H2, refinancing of a $200M facility to a Huntington‑led term loan, >$20M of share repurchases under a $75M authorization, a $4.4M private‑equity impairment, underlying investment income ≈$10M, and an expected share‑based‑comp run rate of ~$8–9M per quarter.Root Financial Statement Overview
Summary
Income Statement
72
Positive
Balance Sheet
68
Positive
Cash Flow
83
Very Positive
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 1.57B | 1.52B | 1.18B | 455.00M | 310.80M | 345.40M |
| Gross Profit | 494.40M | 386.60M | 337.10M | 76.10M | -32.20M | -51.90M |
| EBITDA | 95.00M | 73.60M | 88.00M | -88.70M | -249.30M | -484.50M |
| Net Income | 61.20M | 40.30M | 30.90M | -147.40M | -297.70M | -521.10M |
Balance Sheet | ||||||
| Total Assets | 1.67B | 1.54B | 1.32B | 1.17B | 1.09B | 1.06B |
| Cash, Cash Equivalents and Short-Term Investments | 1.03B | 689.90M | 600.30M | 679.70M | 763.10M | 707.00M |
| Total Debt | 310.80M | 201.30M | 202.30M | 299.30M | 298.60M | 14.10M |
| Total Liabilities | 1.34B | 1.14B | 1.00B | 896.50M | 700.80M | 415.10M |
| Stockholders Equity | 327.90M | 396.30M | 315.70M | 277.70M | 389.10M | 648.40M |
Cash Flow | ||||||
| Free Cash Flow | 179.20M | 192.40M | 183.90M | -43.00M | -220.70M | -414.60M |
| Operating Cash Flow | 194.50M | 206.50M | 195.70M | -33.60M | -210.60M | -403.40M |
| Investing Cash Flow | -220.40M | -91.70M | -154.40M | -45.70M | -16.60M | 76.90M |
| Financing Cash Flow | -41.80M | -25.20M | -120.70M | -4.10M | 283.30M | -80.30M |
Root Technical Analysis
Positive
57.95
Price Trends
56.62
Negative
54.83
Positive
60.77
Negative
Market Momentum
-0.92
Negative
51.13
Neutral
87.76
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ROOT, the sentiment is Positive. The current price of 57.95 is above the 20-day moving average (MA) of 54.73, above the 50-day MA of 56.62, and below the 200-day MA of 60.77, indicating a neutral trend. The MACD of -0.92 indicates Negative momentum. The RSI at 51.13 is Neutral, neither overbought nor oversold. The STOCH value of 87.76 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive 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 |
|---|---|---|---|---|---|---|---|
85 Outperform | $2.66B | 4.98 | 50.69% | ― | 41.43% | -57.28% | |
81 Outperform | $2.27B | 7.04 | 30.79% | 0.89% | 22.83% | 86.58% | |
74 Outperform | $1.52B | 22.13 | 7.16% | 3.57% | 7.04% | -18.57% | |
71 Outperform | $864.02M | 15.04 | 15.91% | ― | 14.86% | -30.59% | |
71 Outperform | $2.11B | 15.08 | 8.40% | 3.11% | 22.49% | 44.43% | |
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% | |
52 Neutral | $4.13B | -28.54 | -26.78% | ― | 76.73% | 35.36% |
* Financial Sector Average
ROOT
Root
55.79
-32.20
-36.60%
SAFT
Safety Insurance Group
103.59
33.60
48.02%
STC
Stewart Information Services
69.20
-1.75
-2.47%
HCI
HCI Group
182.52
20.14
12.40%
LMND
Lemonade
53.37
0.14
0.26%
SLDE
Slide Insurance Holdings, Inc.
22.74
8.94
64.84%
Root Corporate Events
Business Operations and StrategyStock BuybackFinancial DisclosuresPrivate Placements and Financing
Root Maintains Profitability and Expands Distribution in Q2
Positive
Aug 5, 2026
In the second quarter of 2026, Root reported continued profitability, with net income rising 15% year-over-year to $25 million and generating an estimated 31% annualized return on equity. Revenue grew 2% to $389 million and adjusted EBITDA climbed...
Executive/Board ChangesRegulatory Filings and ComplianceShareholder Meetings
Root shareholders approve officer liability protection amendment
Neutral
Jun 8, 2026
At its 2026 Annual Meeting of Stockholders held on June 3, 2026, Root, Inc. shareholders approved an amendment to the company’s certificate of incorporation to extend exculpation protections against monetary liability to certain officers, al...
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.