Root, Inc. (ROOT)
NASDAQ:ROOT
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Root
(NASDAQ:ROOT)
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Rating:76Outperform
Price Target:
$64.00
▲(17.00% Upside)
Action:UpgradedDate:05/09/26
The score is driven primarily by improved financial performance (profitability plus strong cash generation) and a constructive earnings outlook supported by record results and disciplined guidance. Valuation is favorable due to a very low P/E, while the main offset is technicals: short-term momentum is positive, but the stock is still below longer-term moving averages, signaling remaining trend risk.
Positive Factors
Cash Generation
Root’s recent operating and free cash flow strength demonstrates durable cash generation and strong earnings-to-cash conversion. This cash flexibility supports reinvestment in tech and distribution, debt refinancing, and buybacks while providing a buffer against underwriting volatility over the medium term.
Negative Factors
Thin Margins
Compressed gross and modest operating margins leave limited cushion against higher loss ratios or adverse reserve development. With underwriting profitability still recently improved, thinner margins increase sensitivity to frequency/severity shocks and could quickly erode cash generation if trends reverse.
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Positive Factors
Negative Factors
Cash Generation
Root’s recent operating and free cash flow strength demonstrates durable cash generation and strong earnings-to-cash conversion. This cash flexibility supports reinvestment in tech and distribution, debt refinancing, and buybacks while providing a buffer against underwriting volatility over the medium term.
Read all positive factors
Root (ROOT) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$892.53M
Dividend YieldN/A
Average Volume (3M)315.17K
Price to Earnings (P/E)4.8
Beta (1Y)1.16
Revenue Growth22.83%
EPS Growth2.00%
CountryUS
Employees1,021
SectorFinancial
Sector Strength70
IndustryInsurance - Property & Casualty
Share Statistics
EPS (TTM)3.53
Shares Outstanding14,015,900
10 Day Avg. Volume338,092
30 Day Avg. Volume315,166
Financial Highlights & Ratios
PEG Ratio1.03
Price to Book (P/B)2.83
Price to Sales (P/S)0.74
P/FCF Ratio5.82
Enterprise Value/Market Cap0.43
Enterprise Value/Revenue0.24
Enterprise Value/Gross Profit0.86
Enterprise Value/Ebitda4.16
Forecast
1Y Price Target
$68.33Price Target Upside24.92% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering3
EPS Forecast (FY)1.96
Revenue Forecast (FY)$1.66B
Root Business Overview & Revenue Model
Company Description
Root, 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 appl...
How the Company Makes Money
Root makes money primarily by underwriting personal lines insurance policies and earning premium revenue from policyholders. Like other insurers, it collects premiums upfront (or over the policy term) and is profitable when earned premiums exceed ...
Root Earnings Call Summary
Earnings Call Date:May 06, 2026
(Q1-2026)
| % Change Since: |
Next Earnings Date:Aug 12, 2026
Earnings Call Sentiment Positive
The call was broadly positive: management reported record profitability, meaningful YoY improvements in net income, operating income and adjusted EBITDA, strong unit-economics gains (LTV +~15%) and diversification gains with partnerships up 30% YoY and embedded volume milestones (Carvana >200k). Near-term challenges are acknowledged — a difficult direct channel, a 5% moderation in gross premiums written due to difficult comps, seasonal headwinds that should push loss ratios up modestly through the year, and macro risks around fuel and supply chains — but management presents these as cyclical, manageable and consistent with a disciplined capital allocation stance. Given the prominence of the record financial results, balance-sheet actions and distribution expansion versus cyclical/operational headwinds, the overall tone is constructive.Positive Updates
Record Profitability and Strong Earnings
Most profitable quarter in company history with annualized ROE of 47%. Q1 net income of $36 million, up $18 million year-over-year. Operating income of $41 million (up $17 million YoY) and adjusted EBITDA of $57 million (up $25 million YoY). Management attributes results to improved pricing, underwriting and capital allocation.
Negative Updates
Direct Channel Growth Headwinds and Competitive Intensity
Direct channel experienced a difficult growth environment that intensified through the quarter. Management pulled back direct marketing spend (sales & marketing expense was lower than expected) and expects the challenging environment may persist near-term, which could keep PIF growth nearer Q1 levels unless competition/returns change.
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Q1-2026 Updates
Positive
Negative
Record Profitability and Strong Earnings
Most profitable quarter in company history with annualized ROE of 47%. Q1 net income of $36 million, up $18 million year-over-year. Operating income of $41 million (up $17 million YoY) and adjusted EBITDA of $57 million (up $25 million YoY). Management attributes results to improved pricing, underwriting and capital allocation.
Read all positive updates
Company Guidance
Management's guidance was disciplined and data‑driven: if the current macro persists, expect policies in force growth roughly similar to Q1 (~9% YoY) and 2026 net income to exceed 2025 after a record Q1 that produced an annualized ROE of 47%, net income of $36M (+$18M YoY), operating income of $41M and adjusted EBITDA of $57M (+$25M YoY); Q1 gross premiums written were $389M (‑5% YoY) with gross premiums earned of $370M (+8% YoY) and customer LTV improved ~15%; distribution gains included partnerships/independent agent new writings +30% YoY, >15,000 agents across 5,000 agencies, and Carvana >200K policies; loss metrics showed a gross accident‑period loss ratio of 58.8% and gross loss ratio of 54.5% (≈4.3 pts favorable development — ~2.5 pts from 2025 accident year and ~1.5 pts from subrogation), with a target accident‑period loss ratio of 60–65% (Q2–Q3 ~60–62%, Q4 higher seasonality); OpEx (G&A + tech) is expected to remain ~10–11% of gross earned premium; capital actions include refinancing a $200M facility (saving ≈$5M/year in interest) and a $75M share repurchase authorization, while direct marketing spend will remain opportunistic and similar to Q1 until return hurdles improve.Root Financial Statement Overview
Summary
Income Statement
74
Positive
Balance Sheet
66
Positive
Cash Flow
78
Positive
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 1.56B | 1.52B | 1.18B | 455.00M | 310.80M | 345.40M |
| Gross Profit | 446.80M | 386.60M | 337.10M | 76.10M | -32.20M | -51.90M |
| EBITDA | 91.90M | 73.60M | 88.00M | -88.70M | -249.30M | -484.50M |
| Net Income | 57.80M | 40.30M | 30.90M | -147.40M | -297.70M | -521.10M |
Balance Sheet | ||||||
| Total Assets | 1.56B | 1.54B | 1.32B | 1.17B | 1.09B | 1.06B |
| Cash, Cash Equivalents and Short-Term Investments | 608.90M | 689.90M | 600.30M | 679.70M | 763.10M | 707.00M |
| Total Debt | 200.30M | 201.30M | 202.30M | 299.30M | 298.60M | 14.10M |
| Total Liabilities | 1.12B | 1.14B | 1.00B | 896.50M | 700.80M | 415.10M |
| Stockholders Equity | 437.90M | 396.30M | 315.70M | 277.70M | 389.10M | 648.40M |
Cash Flow | ||||||
| Free Cash Flow | 180.90M | 192.40M | 183.90M | -43.00M | -220.70M | -414.60M |
| Operating Cash Flow | 189.00M | 206.50M | 195.70M | -33.60M | -210.60M | -403.40M |
| Investing Cash Flow | -164.50M | -91.70M | -154.40M | -45.70M | -16.60M | 76.90M |
| Financing Cash Flow | -26.10M | -25.20M | -120.70M | -4.10M | 283.30M | -80.30M |
Root Technical Analysis
Neutral
54.70
Price Trends
50.36
Positive
62.26
Negative
79.01
Negative
Market Momentum
0.27
Negative
65.86
Neutral
89.64
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ROOT, the sentiment is Neutral. The current price of 54.7 is above the 20-day moving average (MA) of 46.37, above the 50-day MA of 50.36, and below the 200-day MA of 79.01, indicating a neutral trend. The MACD of 0.27 indicates Negative momentum. The RSI at 65.86 is Neutral, neither overbought nor oversold. The STOCH value of 89.64 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral 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 |
|---|---|---|---|---|---|---|---|
88 Outperform | $2.11B | 3.98 | 66.67% | ― | ― | ― | |
76 Outperform | $892.53M | 4.80 | 15.42% | ― | 22.83% | 2.00% | |
75 Outperform | $1.94B | 5.18 | 33.89% | 0.82% | 22.11% | 90.84% | |
70 Outperform | $2.12B | 27.96 | 0.03% | 2.88% | 21.30% | 69.50% | |
68 Neutral | $1.05B | -18.38 | 11.29% | 4.59% | 10.67% | -13.23% | |
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% | |
52 Neutral | $4.23B | -33.40 | -26.52% | ― | 57.13% | 38.73% |
* Financial Sector Average
ROOT
Root
56.41
-95.64
-62.90%
SAFT
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STC
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HCI
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LMND
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SLDE
Slide Insurance Holdings, Inc.
18.46
-4.84
-20.77%
Root Corporate Events
Business Operations and StrategyStock BuybackFinancial DisclosuresPrivate Placements and Financing
Root Secures New Term Loan and Share Repurchase Authorization
Positive
May 6, 2026
On May 4, 2026, Root, Inc. entered into a new $200 million senior secured term loan led by The Huntington National Bank, with borrowings maturing in 2029, secured by substantially all assets of the borrower and guarantor subsidiaries, and governed...
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.