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Root (ROOT)
NASDAQ:ROOT
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Root
(NASDAQ:ROOT)
62Neutral
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 (ROOT) vs. S&P 500 (SPY)
Market Cap
$2.12B
Dividend YieldN/A
Average Volume (3M)617.33K
Price to Earnings (P/E)88.0
Beta (1Y)1.36
Revenue Growth98.66%
EPS GrowthN/A
CountryUS
Employees1,021
SectorFinancial
Sector Strength89
IndustryInsurance - Property & Casualty
Share Statistics
EPS (TTM)1.07
Shares Outstanding11,361,118
10 Day Avg. Volume438,630
30 Day Avg. Volume617,329
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.00
Price to Cash Flow (P/CF)0.00
P/FCF Ratio0.00
Enterprise Value/Market Cap0.73
Enterprise Value/RevenueN/A
Enterprise Value/Gross Profit1.32
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$131.80Price Target Upside-10.60% Downside
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, Inc. generates revenue primarily through the sale of auto insurance policies. The company uses a direct-to-consumer model, allowing it to bypass traditional insurance agents and brokers, thereby reducing costs. Root's primary revenue stream comes from insurance premiums paid by policyholders. The company employs telematics data, collected via its mobile app, to assess the risk profile of drivers and tailor premiums accordingly. This personalized pricing strategy is designed to attract safer drivers, potentially reducing claims costs. In addition, Root may invest the premiums collected, generating investment income. The company also seeks to expand its offerings and capture more market share, leveraging technology and data analytics to improve underwriting processes and customer acquisition.
Root Financial Statement Overview
Summary
Root has demonstrated impressive revenue growth and a return to profitability in 2024, signaling a positive trajectory. However, the company faces challenges with operational efficiency and cash flow management. The balance sheet remains robust with no debt, but equity has been declining, calling for attention to long-term capital strategy.Income Statement
Root has shown significant improvement in revenue, with a growth rate of approximately 158% from 2023 to 2024. The gross profit margin for 2024 is 100% due to the structure of the financials. The company turned profitable with a net profit margin of 2.63% in 2024, a notable recovery from previous losses. However, EBIT and EBITDA margins remain low, indicating room for operational efficiency gains.―
Balance Sheet
The company's balance sheet is strong with no debt in 2024, reducing financial risk. The equity ratio is 37.55%, suggesting a stable capital structure. However, a decrease in stockholders' equity over the years indicates potential issues with capital retention or investment returns.70
Cash Flow
The company has negative free cash flow, indicating cash outflows exceed inflows, which is a concern. The operating cash flow to net income ratio is negative, highlighting issues in converting income into cash. Despite these challenges, free cash flow has slightly improved from 2023 to 2024.―
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 1.18B | 455.00M | 310.80M | 345.40M | 346.80M | Gross Profit |
| 1.18B | 455.00M | 310.80M | 345.40M | 346.80M | EBIT |
| 78.50M | -101.30M | -263.10M | -527.90M | -363.00M | EBITDA |
| 78.50M | -93.50M | -249.30M | -484.50M | -269.70M | Net Income Common Stockholders |
| 30.90M | -147.40M | 6.20M | -521.10M | -363.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 230.40M | 678.70M | 890.90M | 835.90M | 1.34B | Total Assets |
| 1.50B | 1.35B | 1.31B | 1.32B | 1.76B | Total Debt |
| 200.10M | 299.00M | 295.40M | 14.10M | 178.00M | Net Debt |
| -230.40M | -379.70M | -466.70M | -691.90M | -934.80M | Total Liabilities |
| 1.29B | 1.07B | 1.04B | 130.70M | 729.90M | Stockholders Equity |
| 203.70M | 277.70M | 277.10M | 536.40M | 1.03B |
| Cash Flow | Free Cash Flow | |||
| -43.60M | -43.00M | -220.70M | -414.60M | -303.30M | Operating Cash Flow |
| -43.20M | -33.60M | -210.60M | -403.40M | -287.20M | Investing Cash Flow |
| -10.10M | -45.70M | -16.60M | 76.90M | -114.10M | Financing Cash Flow |
| -120.70M | -4.10M | 283.30M | -80.30M | 1.10B |
Root Technical Analysis
Positive
147.42
Price Trends
137.91
Positive
114.80
Positive
86.19
Positive
Market Momentum
3.15
Negative
56.83
Neutral
49.85
Neutral
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 147.42 is above the 20-day moving average (MA) of 138.15, above the 50-day MA of 137.91, and above the 200-day MA of 86.19, indicating a bullish trend. The MACD of 3.15 indicates Negative momentum. The RSI at 56.83 is Neutral, neither overbought nor oversold. The STOCH value of 49.85 is Neutral, 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
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
79 Outperform | $2.35B | 19.47 | 16.03% | ― | 25.88% | 9.45% | |
70 Outperform | $1.34B | 31.35 | 14.40% | ― | 50.21% | 37.28% | |
69 Neutral | $1.15B | 16.29 | 8.75% | 4.61% | 18.54% | 40.88% | |
67 Neutral | $1.58B | 16.73 | 28.75% | 1.03% | 20.95% | 3.25% | |
64 Neutral | $12.57B | 9.74 | 7.88% | 16985.68% | 12.42% | -5.45% | |
62 Neutral | $2.12B | 88.01 | 17.95% | ― | 98.66% | ― | |
56 Neutral | $2.22B | ― | -35.57% | ― | 21.44% | 2.99% |
* Financial Sector Average
Performance Comparison
ROOT
Root
147.42
83.56
130.85%
SAFT
Safety Insurance Group
78.43
-1.04
-1.31%
HCI
HCI Group
167.13
64.90
63.48%
LMND
Lemonade
31.07
14.49
87.39%
SKWD
Skyward Specialty Insurance Group, Inc.
59.87
22.51
60.25%
BOW
Bowhead Specialty Holdings Inc.
39.52
13.82
53.77%
Root Earnings Call Summary
Earnings Call Date:May 07, 2025
(Q1-2025)
| % Change Since: 5.35%|
Next Earnings Date:Aug 06, 2025
Earnings Call Sentiment Positive
The earnings call highlighted strong revenue growth, strategic partnerships, and improved financial metrics. However, these positives are tempered by concerns about seasonal revenue dependencies, potential impacts from tariffs, and regulatory challenges in geographical expansion. The company's ability to manage these risks will be crucial for sustained success.Q1-2025 Updates
Positive Updates
Strong Revenue Growth
Root improved its gross premiums written by 24% from the first quarter of 2024, showcasing significant revenue growth.
Positive Net Income
The company generated net income of $18 million, marking a $25 million improvement year-over-year.
Strategic Partnerships
Root expanded its partner roster to include over 20 total partners, launching new strategic partnerships with Hyundai Capital America and Experian.
Improved Combined Ratio
Root achieved a net combined ratio of 96%, a 6-point improvement on a year-over-year basis.
Capitalization and Cost Management
The company ended the period with $347 million in unencumbered capital and realized interest expense savings from an amended debt facility with BlackRock.
Negative Updates
Seasonal Revenue Dependency
The first quarter benefited from seasonal favorability driven by tax refunds and lower miles driven, which is not expected to persist into the rest of 2025.
Potential Impact of Tariffs
The company anticipates a mid-single-digit impact on the loss ratio due to imposed tariffs, which could necessitate future rate adjustments.
Geographical Expansion Challenges
While Root is expanding to new states, regulatory approvals are pending in key markets like Michigan, Washington, New Jersey, and Massachusetts.
Company Guidance
During the Root, Inc. First Quarter 2025 Earnings Conference Call, the company reported strong financial performance, achieving a net income of $18 million, operating income of $24 million, and adjusted EBITDA of $32 million, which reflect significant year-over-year improvements. Gross premiums written increased by 24% compared to the first quarter of 2024, driven by growth in both direct and partnership channels. The company maintained a gross accident period loss ratio of 58% and a net combined ratio of 96%. Root highlighted successful efforts in expanding its partnership network, with new collaborations with Hyundai Capital America and Experian, and reported that new writings in partnership channels more than doubled year-over-year. Root remains focused on disciplined underwriting and leveraging technology to maintain its competitive edge. The company also emphasized its strategic expansion across the U.S., now operating in 35 states, and plans to continue scaling its direct channel and partnerships. The quarter benefited from seasonal factors like tax refunds, but Root anticipates a moderation in growth for the remainder of the year.Root Corporate Events
Business Operations and StrategyFinancial Disclosures
Root Reports Strong Q1 2025 Growth and Profitability
Positive
May 7, 2025
In the first quarter of 2025, Root reported significant growth and profitability, with a 24% increase in gross premiums written and a net income of $18 million. The company has formed new partnerships with Hyundai Capital America and Experian, enhancing its distribution and customer experience. Root’s strong underwriting performance and disciplined approach have positioned it well in the uncertain macroeconomic environment, allowing it to maintain competitive pricing and expand its geographic presence.
Spark’s Take on ROOT Stock
According to Spark, TipRanks’ AI Analyst, ROOT is a Neutral.
Root’s strong revenue growth, profitability achievement, and strategic advancements such as policy growth and expense reduction are significant positives. However, operational efficiency and cash flow issues, coupled with a high P/E ratio, pose risks. Despite these challenges, the company’s robust earnings call suggests a positive outlook, contributing to a moderately favorable overall score.
To see Spark’s full report on ROOT stock, click here.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
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.