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Root (ROOT)
NASDAQ:ROOT
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Root
(NASDAQ:ROOT)67Neutral
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.
Root (ROOT) vs. S&P 500 (SPY)
Market Cap
$2.01B
Dividend YieldN/A
Average Volume (3M)567.42K
Price to Earnings (P/E)84.6
Beta (1Y)1.49
Revenue Growth158.57%
EPS GrowthN/A
CountryUS
Employees680
SectorFinancial
Sector Strength93
IndustryInsurance
Share Statistics
EPS (TTM)1.56
Shares Outstanding11,200,000
10 Day Avg. Volume920,264
30 Day Avg. Volume567,421
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)1.65
Price to Cash Flow (P/CF)7.00
P/FCF Ratio7.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$83.25Price Target Upside-37.10% Downside
Rating ConsensusModerate Buy
Number of Analyst Covering5
Root Business Overview & Revenue Model
Company DescriptionRoot, Inc. (ROOT) is a technology-driven insurance company primarily operating in the auto insurance sector. Leveraging a mobile-first platform, Root uses data science and technology to offer personalized insurance products with a focus on user experience and cost efficiency. The company aims to disrupt traditional insurance models by utilizing telematics to assess driving behavior and offer competitive pricing to customers.
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.65
Positive
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
Positive
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 2024.50
Neutral
| 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
132.35
Price Trends
96.39
Positive
84.24
Positive
67.45
Positive
Market Momentum
9.15
Negative
67.30
Neutral
81.62
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 132.35 is above the 20-day moving average (MA) of 118.07, above the 50-day MA of 96.39, and above the 200-day MA of 67.45, indicating a bullish trend. The MACD of 9.15 indicates Negative momentum. The RSI at 67.30 is Neutral, neither overbought nor oversold. The STOCH value of 81.62 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 62 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 |
|---|---|---|---|---|---|---|---|
69 Neutral | $3.86B | ― | 2.51% | ― | 56.54% | ― | |
67 Neutral | $2.01B | 84.55 | 15.17% | ― | 158.57% | ― | |
64 Neutral | $14.34B | 10.61 | 9.28% | 4.07% | 18.04% | -9.54% | |
58 Neutral | $697.66M | ― | -38.91% | ― | 84.92% | 58.62% | |
55 Neutral | $2.72B | ― | -34.07% | ― | 20.94% | 16.23% | |
52 Neutral | $361.93M | ― | -1.24% | ― | 8.74% | 89.80% | |
46 Neutral | $1.89B | ― | -12.61% | ― | -32.45% | 80.24% |
* Financial Sector Average
Performance Comparison
ROOT
Root
142.75
98.63
223.55%
LMND
Lemonade
36.83
20.74
128.90%
GOCO
GoHealth
15.67
2.97
23.39%
CLOV
Clover Health Investments
3.83
3.03
378.75%
HIPO
Hippo Holdings
29.59
10.20
52.60%
OSCR
Oscar Health
16.25
1.30
8.70%
Root Earnings Call Summary
Earnings Call Date: Feb 26, 2025 | % Change Since: 34.08% | Next Earnings Date: Apr 30, 2025
Earnings Call Sentiment Positive
The earnings call highlighted Root's strong financial performance and strategic advancements, such as achieving profitability, growth in policies, and expansion in partnership channels. While competition and macroeconomic uncertainties present challenges, the company's proactive measures and technological capabilities position it well for future growth.Highlights
Net Income Profitability Achieved
Root achieved its first full year of net income profitability in 2024, generating GAAP net income of $31 million and adjusted EBITDA of $112 million.
Improved Combined and Loss Ratios
Root achieved a gross combined ratio of 95 and a gross loss ratio of 59%, indicating strong underwriting performance and operational efficiency.
Significant Policy Growth
Policies in force grew by 21% year-over-year to more than 414,000, demonstrating strong customer acquisition and retention.
Partnership Channel Expansion
Root more than doubled new writings in 2024 through its partnership channel, which now represents roughly a third of overall new business.
Reduction in Reinsurance Costs
Root reduced its reinsurance costs significantly, with 9% of gross earned premium ceded in Q4, reflecting improved underwriting results.
Debt Refinancing and Interest Expense Reduction
Root refinanced its debt facility with Blackrock, reducing run rate interest expense by approximately 50% in 2025.
Lowlights
Competitive Market Environment
Increased competition was observed in Q4, potentially impacting pricing and market share dynamics.
Potential Impact of Macroeconomic Factors
Concerns were noted regarding potential impacts from macroeconomic changes, including tariffs, although no immediate effects are expected.
Company Guidance
In the fourth quarter of 2024, Root Inc. achieved significant milestones, reporting a gross combined ratio of 95 on $1.3 billion in gross premiums written, alongside a GAAP net income of $31 million and an adjusted EBITDA of $112 million. Notably, the company reduced its gross loss ratio to 59% and increased its policies in force by 21% year-over-year to over 414,000. Root's financial strategy allowed them to reduce run rate interest expenses by over 50% and lower reinsurance costs, while maintaining strong reinsurance protection for tail risk events. The fourth quarter alone saw a net income of $22 million and an operating income of $35 million, with a gross accident period loss ratio of 61% and a gross combined ratio of 91%, marking a 19-point improvement year-over-year. These results underscore Root's successful implementation of advanced pricing and underwriting models, expansion within its partnership channels, and disciplined capital management, all contributing to its robust performance and positive outlook for 2025.Root Corporate Events
Private Placements and FinancingBusiness Operations and StrategyFinancial Disclosures
Root Achieves Profitability and Growth in Q3 2024
Positive
Oct 30, 2024
Root achieved a significant milestone by reaching net income profitability in Q3 2024, highlighting the strength of its business model and technology. The company’s recent debt refinancing has improved its earnings profile significantly. Root’s Partnership channel saw a remarkable 131% increase in new writings year-over-year, while policies in force grew 57%. Despite major weather events, the company maintained a solid gross loss ratio of 57%, thanks to its data science and machine learning capabilities.
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.