Root, Inc. (ROOT) | Investment Case

1. Company Snapshot

1.a. 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.

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1.b. Last Insights on ROOT

Root, Inc.'s recent performance was negatively impacted by a high combined ratio, although the company demonstrated underwriting strength and AI-driven pricing gains. The company's Q3 2025 earnings call highlighted its pivot to an embedded business model, driving growth and reducing customer acquisition costs. A "hold" rating from brokerages, citing strong profitability and tech-driven growth, according to MarketBeat. A recent investment by Palisades Investment Partners, totaling $7.3 million, signals potential for growth.

1.c. Company Highlights

Last Price	81.56
Change Percentage	0.06%
Open	81.51
Previous Close	81.51
Market Cap ( Millions)	1118
Volume	23808
Year High	181.14
Year Low	68.08
M A 50	81.39
M A 200	113.09

FCF Yield	17.05%
Dividend Yield	0.00%
ROE	39.73%
Debt / Equity	81.84%
Net Debt / EBIDTA	-368.98%
Price To Book	5.14
Price Earnings Ratio	14.73
Price To FCF	5.86
Price To sales	0.82
EV / EBITDA	5.65

2. Root's Q3 2025 Earnings: Strong Growth Amidst Competitive Landscape

Root's third-quarter 2025 earnings report showcased a robust performance, with the company achieving record policies in force and revenue. The net loss was $5 million, an improvement from the expected loss, with actual EPS coming in at '-0.35' relative to estimates at '-0.43'. The company reported operating income of $300,000 and adjusted EBITDA of $34 million. Revenue growth was driven by accelerating direct and partnership distribution channels, with double-digit percentage increases in policies in force, written premium, and earned premium year-over-year.

Publication Date: Nov -23

                                    📋 Highlights
                                    Record Performance:
                                                20% increase in customer LTVs and 59% gross accident period loss ratio.
Financial Results:
                                                Net loss of $5M driven by $17M non-cash warrant expense, but adjusted EBITDA of $34M and YTD net income of $35M.
Growth Momentum:
                                                Double-digit YoY increases in policies in force, written, and earned premiums.
Capital Strength:
                                                $309M unencumbered capital to fund high-profit opportunities and optimize operations.
Strategic Investment:
                                                $5M quarterly boost to direct R&D marketing to accelerate growth in partnership and new product channels.

                                

Financial Highlights and Loss Ratio

The company's gross accident period loss ratio stood at 59%, indicating an exceptional underwriting performance. The loss ratio has been a key metric for Root, and the company's newest pricing algorithm contributed to a 20% increase in customer LTVs. The unencumbered capital of $309 million at the end of the third quarter positions Root well to optimize its operating structure and deploy growth capital to high-profit-yielding opportunities.

Growth Strategy and Outlook

Root's growth strategy includes expanding its partnership channel, launching new products, and investing in direct marketing. The company plans to increase its investment in direct R&D marketing by $5 million in the fourth quarter. Despite an increasingly competitive environment, Root remains optimistic about its growth prospects, driven by its superior technology and pricing advantage. Analysts estimate next year's revenue growth at 5.9%, indicating a continued upward trajectory.

Valuation and Key Metrics

Root's current valuation metrics, such as a Price-to-Book Ratio (P/B) of 4.76 and an EV/EBITDA of 4.96, suggest that the market has priced in a certain level of growth. The company's strong capital position and return on equity (ROE) of 39.73% are positives. As Root continues to execute its growth strategy, its ability to maintain a competitive edge will be crucial in achieving its goal of becoming the largest, most profitable personal lines insurance carrier in the United States.

3. NewsRoom

Capital Fund Management S.A. Acquires Shares of 15,154 Root, Inc. $ROOT

Dec -04

Source: defenseworld.net

Root, Inc. to Participate in Citi's 2025 Insurance Access Day

Dec -03

Source: globenewswire.com

Root (NASDAQ:ROOT) Reaches New 12-Month Low – What’s Next?

Nov -23

Source: defenseworld.net

Root, Inc. (ROOT) Q3 2025 Earnings Call Transcript

Nov -06

Source: seekingalpha.com

This Small-Cap Fund Just Bet $7 Million on Root's Comeback

Nov -01

Source: fool.com

Root, Inc. (NASDAQ:ROOT) Given Consensus Recommendation of “Hold” by Brokerages

Oct -31

Source: defenseworld.net

Root's Quiet Revolution

Oct -23

Source: seekingalpha.com

Codeword Accelerates Growth With Wins Across AI, Insurtech, and SaaS

Oct -14

Source: globenewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (13.35%)

6. Segments

Insurance Products

Expected Growth: 13.35%

Root, Inc.'s 13.35% growth in insurance products is driven by its telematics-based underwriting, which accurately assesses risk and offers personalized premiums. Additionally, its mobile-first approach and user-friendly interface enhance customer experience, leading to increased adoption. Furthermore, the company's expansion into new markets and strategic partnerships have contributed to its rapid growth.

7. Detailed Products

Root Car Insurance

Personalized car insurance that uses telematics data to provide fair and accurate premiums

Root Renters Insurance

Affordable renters insurance that protects personal belongings and provides liability coverage

Root Home Insurance

Customizable home insurance that covers the home and personal belongings

Root Health Insurance

Affordable health insurance plans that provide comprehensive coverage

Root Roadside Assistance

24/7 roadside assistance for drivers who need help with towing, battery jump-starts, and more

8. Root, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Root, Inc. faces moderate threat from substitutes, as customers have limited alternatives for its financial services.

Bargaining Power Of Customers

Root, Inc. has a large customer base, giving customers significant bargaining power, which can lead to pressure on prices and services.

Bargaining Power Of Suppliers

Root, Inc. has a diversified supplier base, reducing the bargaining power of individual suppliers, and minimizing the risk of supply chain disruptions.

Threat Of New Entrants

Root, Inc. operates in a highly regulated industry, making it challenging for new entrants to enter the market, but not impossible.

Intensity Of Rivalry

Root, Inc. operates in a highly competitive market, with many established players, leading to intense rivalry and pressure on prices and services.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	51.43%
Debt Cost	3.95%
Equity Weight	48.57%
Equity Cost	17.51%
WACC	10.54%
Leverage	105.91%

11. Quality Control: Root, Inc. passed 2 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Kingstone

A-Score: 6.0/10

Value: 7.7

Growth: 6.4

Quality: 9.0

Yield: 1.0

Momentum: 9.5

Volatility: 2.7

1-Year Total Return ->

Root

A-Score: 5.5/10

Value: 6.6

Growth: 8.6

Quality: 7.2

Yield: 0.0

Momentum: 9.5

Volatility: 1.0

1-Year Total Return ->

American Coastal Insurance

A-Score: 5.3/10

Value: 7.5

Growth: 4.9

Quality: 5.8

Yield: 6.0

Momentum: 3.5

Volatility: 4.3

1-Year Total Return ->

ProAssurance

A-Score: 5.2/10

Value: 6.1

Growth: 2.9

Quality: 7.1

Yield: 0.0

Momentum: 9.5

Volatility: 5.7

1-Year Total Return ->

Hagerty

A-Score: 5.1/10

Value: 3.0

Growth: 8.4

Quality: 6.6

Yield: 0.0

Momentum: 7.0

Volatility: 5.3

1-Year Total Return ->

Lemonade

A-Score: 4.8/10

Value: 6.4

Growth: 7.0

Quality: 4.1

Yield: 0.0

Momentum: 10.0

Volatility: 1.0

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

-7.46%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

10.54%

Root, Inc. - US77664L2079

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on ROOT

1.c. Company Highlights

More Volatile

Lower Quality

Strong Momentum

Earnings Beats

Revenues Beats

Lower Yield

Expensive

Higher Growth

Revenues Miss

2. Root's Q3 2025 Earnings: Strong Growth Amidst Competitive Landscape

Financial Highlights and Loss Ratio

Growth Strategy and Outlook

Valuation and Key Metrics

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (13.35%)

6. Segments

Insurance Products

Expected Growth: 13.35%

7. Detailed Products

Root Car Insurance

Root Renters Insurance

Root Home Insurance

Root Health Insurance

Root Roadside Assistance

8. Root, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Root, Inc. passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

81.56$

Current Price

81.56$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA