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Roots Corporation (TSE:ROOT)
TSX:ROOT
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Roots Corporation (ROOT) AI Stock Analysis

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TSE:ROOT

Roots Corporation

(TSX:ROOT)

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Neutral 59 (OpenAI - 4o)
Rating:59Neutral
Price Target:
C$3.50
▲(2.64% Upside)
Roots Corporation's overall stock score is driven by positive earnings call highlights, including strong sales growth and margin expansion. However, profitability challenges and poor valuation metrics weigh down the score. Technical analysis shows moderate strength, but the negative P/E ratio and lack of dividend yield are significant concerns.

Roots Corporation (ROOT) vs. iShares MSCI Canada ETF (EWC)

Roots Corporation Business Overview & Revenue Model

Company DescriptionRoots Corporation, together with its subsidiaries, designs, markets, and sells apparel, leather goods, footwear, and accessories under the Roots brand in Canada and internationally. The company operates through two segments, Direct-To-Consumer, and Partners and Other. The Direct-to-Consumer segment sells products through the company's corporate retail stores and e-commerce. The Partners and Other segment engages in the wholesale of Roots branded products to the company's international operating partners, licensees, and wholesale customers. As of January 29, 2022, it operated 107 corporate retail stores in Canada, two stores in the United States, and approximately 100 partner-operated stores in Asia, as well as a Taiwan-based eCommerce site, www.roots.com.tw. Roots Corporation was founded in 1973 and is headquartered in Toronto, Canada.
How the Company Makes MoneyRoots Corporation makes money primarily through the sale of its products in retail stores, online platforms, and through international franchises. The company's revenue streams are diversified across various product categories, including apparel, leather goods, and footwear, which are sold directly to consumers via company-owned stores and e-commerce channels. Additionally, Roots Corporation benefits from licensing agreements and partnerships that allow for expanded distribution and brand presence in global markets. The company also capitalizes on seasonal collections and collaborations with other brands or designers to drive sales and attract new customers.

Roots Corporation Earnings Call Summary

Earnings Call Date:Sep 10, 2025
(Q2-2025)
|
% Change Since: |
Next Earnings Date:Dec 10, 2025
Earnings Call Sentiment Positive
The earnings call reflected a strong performance in sales growth, product launches, brand collaborations, and margin expansion. However, there were challenges with partner sales and increased expenses. Overall, the highlights significantly outweigh the lowlights, signaling a positive financial trajectory.
Q2-2025 Updates
Positive Updates
Strong Sales Growth
Q2 2025 sales of $50.8 million rose 6.3% year-over-year, driven by direct-to-consumer comparable sales growth of 17.8%.
Successful Product Launches
Launch of the Roam collection, incorporating proprietary breathing technology and enhancing versatility for travel, contributing to sales growth.
Brand Collaborations and Engagement
Executed brand collaborations with Molson Canadian and Canada Dry, driving demand and engagement and amplifying brand reach.
Gross Margin Expansion
Gross margins expanded 430 basis points year-over-year, reflecting improved sourcing strategy and markdown management.
Store Optimization Strategy
Improvements in store footprint with new openings and renovations leading to increased sales and enhanced brand experience.
Reduction in Adjusted EBITDA Losses
Adjusted EBITDA losses reduced by 47.9% excluding DSU revaluation impacts.
Healthy Balance Sheet
Net debt reduced by 6.5% to $38.1 million and improved cash flow metrics.
Negative Updates
Decline in Partner and Other Sales
Partner and other sales were down 14.2% due to the reduction in wholesale sales to the Taiwan operating partner.
Increased SG&A Expenses
SG&A expenses increased by 9.1%, driven by higher variable costs, marketing, and personnel expenses.
Net Loss
Q2 2025 net loss was $4.4 million, though improved by 16.1% compared to last year.
Company Guidance
During Root's Second Quarter Earnings Conference Call for Fiscal 2025, the company reported robust financial performance and strategic advancements. Sales reached $50.8 million, a 6.3% increase year-over-year, with direct-to-consumer comparable sales growing by 17.8%. Gross margins expanded by 430 basis points, driven by improved sourcing strategies and disciplined markdown management. The Roam collection, featuring proprietary breathing technology, contributed to product diversification and sales growth. Notably, adjusted EBITDA losses decreased by 47.9%, excluding DSU revaluation impacts. The company also highlighted successful brand collaborations, increased marketing investments, and store optimizations, which collectively enhanced brand perception and sales. Despite a 14.2% decline in partner and other sales due to inventory optimization in Taiwan, double-digit growth was observed in other business lines. Overall, the company's strategic initiatives and marketing efforts have positioned it well for continued growth into the fall and holiday seasons.

Roots Corporation Financial Statement Overview

Summary
Roots Corporation's financial performance is mixed. The company faces profitability challenges with a negative net profit margin and stagnant revenue growth. However, it maintains a stable balance sheet and strong operating cash flows, indicating efficient liquidity management. Key areas for improvement include profitability and cost management.
Income Statement
45
Neutral
Roots Corporation's income statement reveals declining profitability with a negative net profit margin of -12.23% in TTM, indicating financial struggles. The gross profit margin is relatively healthy at 60.13%, but the company is facing challenges in controlling costs below the gross margin line. Revenue growth has been stagnant with a slight increase of 0.96% from the previous year, indicating limited expansion. EBIT and EBITDA margins are also under pressure, with the TTM EBIT margin at 5.92% and a negative EBITDA margin, reflecting operational inefficiencies.
Balance Sheet
55
Neutral
The balance sheet of Roots Corporation shows moderate leverage with a debt-to-equity ratio of 0.75 in TTM, which suggests some reliance on debt but not excessive. The equity ratio stands at 49.70%, indicating a balanced approach between debt and equity financing. However, return on equity is negative due to negative net income, highlighting profitability concerns. Overall, the company maintains a stable asset base but needs to improve profitability to enhance financial health.
Cash Flow
65
Positive
Roots Corporation's cash flow statement demonstrates a strong operating cash flow to net income ratio of 0.84 in TTM, indicating efficient cash generation relative to earnings. However, free cash flow growth has declined by 20.96% from the previous period, suggesting challenges in maintaining cash reserves. The free cash flow to net income ratio is positive, highlighting the company's ability to generate cash despite negative net income, which is a positive sign for liquidity management.
BreakdownTTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue265.44M262.92M262.67M272.12M273.83M240.51M
Gross Profit159.60M157.13M152.46M156.98M162.86M139.74M
EBITDA-5.92M-6.68M41.92M47.38M69.44M62.33M
Net Income-32.46M-33.44M1.84M6.69M22.76M13.08M
Balance Sheet
Total Assets296.53M329.04M369.86M391.89M393.70M390.32M
Cash, Cash Equivalents and Short-Term Investments5.91M34.02M28.03M31.92M34.16M9.17M
Total Debt110.94M119.88M124.88M137.16M148.92M172.27M
Total Liabilities149.18M169.51M179.04M203.85M207.65M226.14M
Stockholders Equity147.36M159.53M190.82M188.04M186.06M164.18M
Cash Flow
Free Cash Flow20.26M25.63M33.86M22.95M52.06M47.50M
Operating Cash Flow27.15M32.33M38.70M29.30M56.47M50.92M
Investing Cash Flow-6.89M-6.70M-5.13M-6.35M-4.41M-3.96M
Financing Cash Flow-26.76M-19.64M-37.45M-25.19M-27.06M-31.52M

Roots Corporation Technical Analysis

Technical Analysis Sentiment
Positive
Last Price3.41
Price Trends
50DMA
3.19
Positive
100DMA
3.15
Positive
200DMA
2.75
Positive
Market Momentum
MACD
0.06
Negative
RSI
65.94
Neutral
STOCH
92.59
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:ROOT, the sentiment is Positive. The current price of 3.41 is above the 20-day moving average (MA) of 3.23, above the 50-day MA of 3.19, and above the 200-day MA of 2.75, indicating a bullish trend. The MACD of 0.06 indicates Negative momentum. The RSI at 65.94 is Neutral, neither overbought nor oversold. The STOCH value of 92.59 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:ROOT.

Roots Corporation Peers Comparison

Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
80
Outperform
8.20B41.4320.76%22.57%197.68%
69
Neutral
51.11B40.8286.66%0.21%9.91%16.96%
66
Neutral
1.82B38.1110.89%2.45%-17.73%
63
Neutral
106.34M129.454.10%-3.57%-95.88%
60
Neutral
106.34M131.904.10%-3.57%-95.88%
59
Neutral
C$135.47M30.45-19.83%4.47%-3217.53%
61
Neutral
$18.38B12.79-2.54%3.03%1.52%-15.83%
* Consumer Cyclical Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
TSE:ROOT
Roots Corporation
3.41
1.29
60.85%
DLMAF
Dollarama
132.58
31.32
30.93%
TSE:RET
Reitmans (Canada)
2.05
-0.57
-21.76%
GOOS
Canada Goose Holdings
13.51
0.84
6.63%
ATZAF
Aritzia
61.99
25.60
70.35%
RTMAF
Reitmans (Canada)
1.50
-0.34
-18.48%

Roots Corporation Corporate Events

Business Operations and StrategyFinancial Disclosures
Roots Corporation Reports Robust Q2 2025 Financial Results
Positive
Sep 10, 2025

Roots Corporation reported strong financial results for the second quarter of fiscal 2025, with a 6.3% increase in total sales to $50.8 million and a notable 12.7% rise in direct-to-consumer sales. The company achieved a 17.8% growth in comparable sales, driven by brand strength and customer engagement, and improved its net loss by 16.1% compared to the previous year. This marks the fourth consecutive quarter of growth in sales, gross margins, and adjusted EBITDA, reflecting positive momentum and strategic investments aimed at sustainable, profitable growth.

The most recent analyst rating on (TSE:ROOT) stock is a Hold with a C$3.50 price target. To see the full list of analyst forecasts on Roots Corporation stock, see the TSE:ROOT Stock Forecast page.

Executive/Board ChangesShareholder Meetings
Roots Corporation Announces Board Changes and Meeting Outcomes
Positive
Jul 22, 2025

Roots Corporation announced the results of its Fiscal 2024 Annual and Special Meeting of Shareholders, highlighting the election of new board members and the reappointment of KPMG LLP as auditors. The inclusion of Scott Cameron and Edward Kernaghan to the board is expected to enhance Roots’ strategic direction, particularly in global expansion and capital markets expertise, reflecting a promising future for the company.

The most recent analyst rating on (TSE:ROOT) stock is a Buy with a C$3.25 price target. To see the full list of analyst forecasts on Roots Corporation stock, see the TSE:ROOT Stock Forecast page.

Business Operations and StrategyFinancial Disclosures
Roots Corporation Reports Strong Q1 Fiscal 2025 Results
Positive
Jun 13, 2025

Roots Corporation reported strong financial results for the first quarter of fiscal 2025, with a 6.7% increase in total sales to $40 million and a notable 10.2% rise in direct-to-consumer sales. The company achieved its third consecutive quarter of year-over-year growth in sales, gross margin, and adjusted EBITDA, driven by strategic initiatives such as enhanced marketing, improved product availability, and AI-driven operational enhancements. Despite a net loss of $7.9 million, the company showed improvement from the previous year, and its strong balance sheet positions it well to adapt to changing market conditions.

The most recent analyst rating on (TSE:ROOT) stock is a Buy with a C$3.25 price target. To see the full list of analyst forecasts on Roots Corporation stock, see the TSE:ROOT Stock Forecast page.

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.Date of analysis: Sep 10, 2025