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Root
(NASDAQ:ROOT)
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Rating:76Outperform
Price Target:
$75.00
▲(37.11% Upside)
Action:Upgraded
Date: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
Strong cash generation
Root's recent operating and free cash flow strength demonstrates the business can convert earnings into real liquidity. Sustained positive OCF/FCF supports reinvestment, debt servicing, and buybacks, reducing funding risk and enabling disciplined capital allocation over the next 2–6 months.
Negative Factors
Compressed margins and thin operating cushion
Margin compression leaves less buffer against underwriting or claim cost deterioration. Thin operating margins mean adverse reserve development, higher loss ratios, or increased acquisition costs could quickly erode profitability and test whether the recent turnaround is durable.
Read all positive and negative factors
Positive Factors
Negative Factors
Strong cash generation
Root's recent operating and free cash flow strength demonstrates the business can convert earnings into real liquidity. Sustained positive OCF/FCF supports reinvestment, debt servicing, and buybacks, reducing funding risk and enabling disciplined capital allocation over the next 2–6 months.
Read all positive factors
Root (ROOT) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$1.05B
Dividend YieldN/A
Average Volume (3M)264.29K
Price to Earnings (P/E)18.2
Beta (1Y)1.06
Revenue Growth22.83%
EPS Growth2.00%
CountryUS
Employees1,256
SectorFinancial
Sector Strength70
IndustryInsurance - Property & Casualty
Share Statistics
EPS (TTM)3.53
Shares Outstanding14,020,060
10 Day Avg. Volume276,534
30 Day Avg. Volume264,294
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 Cap0.26
Enterprise Value/Revenue0.17
Enterprise Value/Gross Profit0.61
Enterprise Value/Ebitda2.95
Forecast
1Y Price Target
$56.00Price Target Upside2.38% Upside
Rating ConsensusHold
Number of Analyst Covering3
EPS Forecast (FY)3.13
Revenue Forecast (FY)$1.59B
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 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 05, 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.
Read all updates
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 | 173.40M | 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
Positive
54.70
Price Trends
55.67
Positive
52.81
Positive
65.21
Positive
Market Momentum
2.46
Negative
67.75
Neutral
89.58
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 54.7 is below the 20-day moving average (MA) of 56.17, below the 50-day MA of 55.67, and below the 200-day MA of 65.21, indicating a bullish trend. The MACD of 2.46 indicates Negative momentum. The RSI at 67.75 is Neutral, neither overbought nor oversold. The STOCH value of 89.58 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 |
|---|---|---|---|---|---|---|---|
84 Outperform | $2.29B | 7.03 | 32.64% | 0.82% | 22.11% | 90.84% | |
82 Outperform | $2.35B | 5.17 | 48.38% | ― | ― | ― | |
76 Outperform | $1.05B | 18.24 | 14.75% | ― | 22.83% | 2.00% | |
75 Outperform | $1.14B | 17.87 | 7.16% | 4.59% | 10.67% | -13.23% | |
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% | |
64 Neutral | $2.05B | 15.04 | 8.36% | 2.88% | 21.30% | 69.50% | |
58 Neutral | $5.46B | -36.82 | -26.52% | ― | 57.13% | 38.73% |
* Financial Sector Average
ROOT
Root
64.40
-57.25
-47.06%
SAFT
Safety Insurance Group
75.93
6.65
9.60%
STC
Stewart Information Services
67.96
9.47
16.19%
HCI
HCI Group
180.78
42.11
30.37%
LMND
Lemonade
70.33
30.56
76.84%
SLDE
Slide Insurance Holdings, Inc.
20.81
1.84
9.70%
Root Corporate Events
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...
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.