Root (ROOT) AI Stock Analysis

• Market Cap: $1.45B
• Dividend Yield: N/A
• Average Volume (3M): 626.52K
• Price to Earnings (P/E): 19.8
• Beta (1Y): 1.44
• Revenue Growth: 59.76%
• EPS Growth: N/A
• Country: US
• Employees: 1,021
• Sector: Financial
• Sector Strength: 75
• Industry: Insurance - Property & Casualty
• EPS (TTM): 1.29
• Shares Outstanding: 13,618,876
• 10 Day Avg. Volume: 439,905
• 30 Day Avg. Volume: 626,523
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): N/A
• P/FCF Ratio: N/A
• Enterprise Value/Market Cap: 1.72
• Enterprise Value/Revenue: 1.83
• Enterprise Value/Gross Profit: 1.83
• Enterprise Value/Ebitda: 20.88
• 1Y Price Target: $130.60
• Price Target Upside: 39.05% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 5

• Rating: 65 Neutral
• Price Target: $95.00 ▲(1.15% Upside)

Root's overall score is driven by strong financial performance and positive earnings call highlights, including record revenue and strategic advancements. However, bearish technical indicators and valuation concerns moderate the score. The company's focus on strategic investments and partnerships is promising, but near-term profitability pressures remain a risk.

Positive Factors

Growth Opportunities

Management is focusing on growth opportunities, such as geographic expansion and partnerships, which could benefit the company in the long term.

Profitability

Root has exited the turnaround phase and moved toward sustained profitability, as evidenced by its positive net income and consecutive quarters of positive operating cash flow.

Negative Factors

Market Competition

Competition in the market might increase, making it more difficult for Root to maintain its current margins and loss ratios.

Valuation

The current valuation is seen as fair, with limited upside potential from current levels, leading to a reaffirmation of a Market Perform rating.

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 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 Money

Root makes money primarily through the sale of automotive insurance policies. Its revenue model is based on collecting premiums from policyholders. The company uses telematics data collected through its mobile app to assess driving behavior, which helps in pricing insurance policies more accurately and potentially reducing the overall risk. This approach allows Root to attract safer drivers who may benefit from lower premiums. Additionally, Root may generate income through investment of the premium reserves, as is common in the insurance industry. Significant partnerships with automotive companies and technology firms could also contribute to customer acquisition and service enhancement, although specific partnership details are not provided.

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.

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.

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.

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

• Technical Analysis Sentiment: Negative
• Last Price: 93.92
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: 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 93.92 is above the 20-day moving average (MA) of 89.45, below the 50-day MA of 109.42, and below the 200-day MA of 115.14, indicating a neutral trend. The MACD of -5.83 indicates Negative momentum. The RSI at 45.60 is Neutral, neither overbought nor oversold. The STOCH value of 53.52 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ROOT.

Root Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SKWD	79 Outperform	$2.00B	15.43	16.20%	―	22.20%	5.78%
SAFT	76 Outperform	$1.08B	12.71	10.08%	4.95%	18.52%	65.66%
HCI	73 Outperform	$2.26B	15.11	23.90%	0.92%	9.62%	-18.69%
BOW	70 Outperform	$1.05B	21.80	13.23%	―	41.00%	61.54%
Sector *	68 Neutral	$18.05B	11.73	10.24%	3.73%	9.66%	1.70%
ROOT	65 Neutral	$1.45B	19.76	27.52%	―	59.76%	―
LMND	55 Neutral	$3.83B	―	-35.10%	―	22.91%	4.95%

Root Corporate Events

Root Reports Strong Q2 2025 Financial Growth

In Q2 2025, Root achieved significant financial growth, with gross earned premium increasing by 21% to $371 million and net income improving by $30 million year-over-year to $22 million. The company launched a new pricing model in several states, enhancing risk selection and customer lifetime values, while expanding its distribution through partnerships and state approvals. Root’s strategic focus on pricing, automation, and customer experience aims to drive future growth and profitability, positioning it as a competitive player in the auto insurance market.

Root Elects New Directors at Annual Meeting

On June 4, 2025, Root Company held its Annual Meeting of Stockholders where key decisions were made regarding its governance and financial oversight. The stockholders elected Jerri DeVard and Nancy Kramer as Class II directors to serve until the 2028 Annual Meeting. Additionally, Deloitte & Touche LLP was ratified as the independent auditor for 2025, and the executive officer compensation was approved on an advisory basis.