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Root (ROOT)
NASDAQ:ROOT
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Root
(NASDAQ:ROOT)
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Rating:68Neutral
Price Target:
$104.00
▲(11.38% Upside)
Root's overall stock score is driven by its strong financial performance and positive earnings call, highlighting record revenue and strategic advancements. However, technical indicators suggest bearish trends, and valuation metrics indicate moderate attractiveness. Near-term profitability pressures and competitive challenges in the direct channel are notable risks.
Positive Factors
Revenue Growth
Root's record revenue growth demonstrates strong market demand and effective pricing strategies, supporting long-term financial stability.
Advancement in Pricing Model
Enhanced pricing models improve risk assessment and customer retention, driving sustainable growth and competitive advantage.
Partnership Channel Growth
Expanding partnerships diversify revenue streams and reduce reliance on direct channels, enhancing resilience against market fluctuations.
Negative Factors
Competitive Pressure on Direct Channel
Heightened competition in direct channels may constrain customer acquisition and growth, pressuring long-term market position.
Potential Near-Term Profitability Pressure
Investment and seasonal pressures could lead to short-term losses, affecting cash flow and necessitating strategic adjustments.
Limited Growth in Direct Policies In Force
Limited growth in direct policies indicates challenges in market penetration, potentially impacting revenue and market share.
Root (ROOT) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$1.59B
Dividend YieldN/A
Average Volume (3M)497.09K
Price to Earnings (P/E)20.7
Beta (1Y)1.41
Revenue Growth59.76%
EPS GrowthN/A
CountryUS
Employees1,021
SectorFinancial
Sector Strength70
IndustryInsurance - Property & Casualty
Share Statistics
EPS (TTM)1.29
Shares Outstanding13,618,876
10 Day Avg. Volume454,678
30 Day Avg. Volume497,094
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)N/A
P/FCF RatioN/A
Enterprise Value/Market Cap1.57
Enterprise Value/Revenue1.83
Enterprise Value/Gross Profit1.83
Enterprise Value/Ebitda20.88
Forecast
1Y Price Target
$126.17Price Target Upside35.13% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering6
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:Aug 06, 2025
(Q2-2025)
| % Change Since: |
Next Earnings Date:Nov 05, 2025
Earnings Call Sentiment Positive
The earnings call reflects a strong quarter with record revenue and significant advancements in pricing and partnerships. However, competitive pressures in the direct channel and potential near-term profitability challenges due to strategic investments and warrant expenses present some concerns.Q2-2025 Updates
Positive Updates
Record Revenue and Net Income
Root achieved a record revenue with $371 million in gross earned premiums and generated a net income of $22 million, marking a $30 million improvement year-over-year.
Advancement in Pricing Model
The new pricing model improved risk selection and increased customer lifetime values by 20% on average, allowing for faster growth and better predictive models.
Partnership Channel Growth
The partnership channel saw new writing nearly triple year-over-year, with strong engagement from independent agents and availability through major comparative raters, expanding Root's reach.
Financial Flexibility and Capital Position
Root reported $314 million in unencumbered capital, maintaining excess capital across subsidiaries, enabling dynamic growth capital deployment.
Improvement in Net Combined Ratio
Achieved a net combined ratio of 95%, an 8-point improvement year-over-year, demonstrating disciplined business management.
Negative Updates
Competitive Pressure on Direct Channel
Increased competition in the direct marketing channel led to reduced marketing spend and a focus on partnership channels.
Potential Near-Term Profitability Pressure
Expected investments and seasonal loss ratio pressure in H2 are anticipated to impact near-term profitability, with a potential net loss in Q3 due to a $16 million to $18 million non-cash warrant expense.
Limited Growth in Direct Policies In Force
Modest growth in policies in force due to soft market conditions and competitive pressures in the direct channel.
Company Guidance
During the second quarter of 2025, Root Inc. achieved notable financial performance, setting a record with $371 million in gross earned premiums and generating a net income of $22 million, marking a $30 million year-over-year improvement. The company delivered an operating income of $27 million and an adjusted EBITDA of $38 million. Root's gross accident period loss ratio stood at 60%, while the net combined ratio improved by 8 points year-over-year to 95%. The quarter also saw policies in force, gross written premium, and gross earned premium increase compared to the previous year. Root's strategy included advancing its AI-driven pricing model, which enhanced risk selection and increased customer lifetime values by 20%. The company expanded its partnership channel, with new writings tripling year-over-year, and maintained a below-target loss ratio of 60%-65%. Despite facing competitive pressures in the direct channel, Root strategically managed marketing spend and continued to invest in growth opportunities, expecting potential near-term profitability pressures due to seasonal loss ratios and R&D investments. The company ended the quarter with $314 million in unencumbered capital, emphasizing a long-term growth focus.Root Financial Statement Overview
Summary
Root has shown commendable revenue and profit growth, with strong cash flow metrics. However, the balance sheet indicates higher leverage, which could pose financial risks if not managed well. Operational efficiency and debt management are areas for improvement.Income Statement
Root has demonstrated strong revenue growth, increasing from $455M in 2023 to $931M TTM. Gross profit margin is high at 99.43%, showing excellent cost management. The net profit margin improved to 5.84% TTM, a significant turnaround from prior losses. However, the EBIT and EBITDA margins are relatively low at 9.83% and 10.45% respectively, indicating room for improvement in operating efficiency.75
Positive
Balance Sheet
The company's balance sheet shows a debt-to-equity ratio of 0.87, which is manageable. Return on equity improved to 23.78% TTM, suggesting effective use of equity capital. However, the equity ratio is low at 14.42%, indicating higher leverage, which could pose financial risks if not managed well.70
Positive
Cash Flow
Operating cash flow improved significantly, and the free cash flow growth is strong at 7.94% TTM. The operating cash flow to net income ratio is robust at 3.82, highlighting efficient cash generation relative to earnings. The free cash flow to net income ratio is 3.65, indicating a healthy conversion of profits into cash.65
Positive
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 1.36B | 1.18B | 455.00M | 310.80M | 345.40M | 346.80M |
| Gross Profit | 1.36B | 1.18B | 455.00M | 310.80M | 345.40M | 346.80M |
| EBITDA | 119.60M | 88.00M | -93.50M | -249.30M | -484.50M | -269.70M |
| Net Income | 85.30M | 30.90M | -147.40M | -297.70M | -521.10M | -363.00M |
Balance Sheet | ||||||
| Total Assets | 1.59B | 1.50B | 1.35B | 1.31B | 1.32B | 1.76B |
| Cash, Cash Equivalents and Short-Term Investments | 641.40M | 906.10M | 678.70M | 890.90M | 835.90M | 1.34B |
| Total Debt | 200.10M | 200.10M | 299.00M | 295.40M | 14.10M | 178.00M |
| Total Liabilities | 1.23B | 1.29B | 1.07B | 1.04B | 130.70M | 729.90M |
| Stockholders Equity | 244.50M | 203.70M | 277.70M | 277.10M | 536.40M | 1.03B |
Cash Flow | ||||||
| Free Cash Flow | 190.60M | 183.90M | -43.00M | -220.70M | -414.60M | -303.30M |
| Operating Cash Flow | 197.40M | 195.70M | -33.60M | -210.60M | -403.40M | -287.20M |
| Investing Cash Flow | -97.70M | -154.40M | -45.70M | -16.60M | 76.90M | -114.10M |
| Financing Cash Flow | -125.40M | -120.70M | -4.10M | 283.30M | -80.30M | 1.10B |
Root Technical Analysis
Negative
93.37
Price Trends
102.39
Negative
118.75
Negative
115.14
Negative
Market Momentum
-0.17
Negative
44.02
Neutral
41.46
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 93.37 is below the 20-day moving average (MA) of 96.00, below the 50-day MA of 102.39, and below the 200-day MA of 115.14, indicating a bearish trend. The MACD of -0.17 indicates Negative momentum. The RSI at 44.02 is Neutral, neither overbought nor oversold. The STOCH value of 41.46 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
Overall Rating
UnderperformOutperform
Sector (68)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | 1.07B | 12.59 | 8.54% | 5.03% | 18.52% | 65.66% | |
79 Outperform | 1.94B | 15.11 | 14.97% | ― | 22.20% | 5.78% | |
73 Outperform | 2.33B | 16.16 | 24.25% | 0.89% | 9.62% | -18.69% | |
70 Outperform | 909.03M | 18.86 | ― | ― | 41.00% | 61.54% | |
68 Neutral | $1.59B | 20.73 | 27.52% | ― | 59.76% | ― | |
55 Neutral | 3.95B | -18.93 | -38.70% | ― | 22.91% | 4.95% | |
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% |
* Financial Sector Average
Performance Comparison
ROOT
Root
93.37
54.28
138.86%
SAFT
Safety Insurance Group
72.03
-6.43
-8.20%
STC
Stewart Information Services
74.18
3.09
4.35%
HCI
HCI Group
179.81
72.19
67.08%
LMND
Lemonade
53.43
36.38
213.37%
SLDE
Slide Insurance Holdings, Inc.
14.06
-9.24
-39.66%
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.