We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
ROOT Loses 33% in 3 Months, Trades at a Premium: How to Play the Stock
Read MoreHide Full Article
Key Takeaways
ROOT stock slid 32.9% in three months, underperforming its industry, sector and the S&P 500.
The insurer leverages AI pricing and partnerships to expand state presence and boost policy growth.
ROOT's ROE is 38.2% and ROIC is 16.7%, both topping industry averages, with analyst forecasts on the rise.
Shares of Root Inc. (ROOT - Free Report) have lost 32.9% in the past three months compared with the industry’s decline of 0.6%. In the meantime, the sector has risen 6.8% and the Zacks S&P 500 composite has gained 9.1%.
ROOT, a provider of automobile and renters insurance products, envisions being the largest and most profitable personal lines insurance carrier in the United States.
It has been trading below its 50-day simple moving average (SMA), signaling a short-term bearish trend. The 50-day SMA is a key indicator for traders and analysts to identify support and resistance levels. It is considered particularly important as it is the first marker of an uptrend or a downtrend.
ROOT Vs Industry, Sector & S&P 500
Image Source: Zacks Investment Research
Shares of its peer Lemonade (LMND - Free Report) have gained 50.8%, while those of another peer, EverQuote (EVER - Free Report) , have lost 4.2% in the past three months.
Lemonade is pursuing growth by acquiring profitable businesses and prioritizing its car insurance segment, which it expects to be a key driver of growth. Alongside diversification into renters, homeowners, pet, and life insurance, the company seeks to expand its market presence. Leveraging technology and AI for efficiency and a competitive edge, Lemonade aims to scale operations and achieve significant expansion. Lemonade has set a target of growing in-force premiums by 28% in 2025, supporting its ambition of tenfold growth.
EverQuote, an online insurance marketplace, sees strong potential from the recovery in auto insurance carrier demand and is actively expanding into new verticals. The company expects to capitalize on the growing shift toward online insurance sales, supported by rising consumer traffic, increased quote requests and innovative advertiser offerings. These factors are anticipated to drive its performance, with EverQuote projecting third-quarter 2025 revenues in the range of $163 million to $169 million, reflecting its growth momentum and strategic positioning.
ROOT Shares Are Expensive
Root shares trade at a price-to-book value ratio of 5.83, above the industry average of 1.57.
Based on short-term price targets offered by five analysts, the Zacks average price target is $130.60 per share. The average suggests a 41.6% upside from the last closing price.
What's Driving ROOT?
ROOT is heavily leaning on technology to improve pricing, one of the strategic pillars of growth, and is thus building on AI and machine learning for improving its pricing. This also helped partnership channel new writings grow nearly three times year over year. The insurer launched a new pricing model in several states during the second quarter of 2025.
ROOT believes it is yet to grow in the massive market. Its growth plan focuses on expansion across three key areas – state expansion, channel expansion and partnerships. Its growth strategy emphasizes geographic expansion, diversification of distribution channels and targeted investments in high-return opportunities, leading to a consistent increase in policies in force.
To expand its addressable market with independent agents, the company recently launched Root Insurance through the industry’s two largest comparative raters, EZLynx and PL Rating.
Growth in the Partnership channel is being driven by expansion across automotive, financial services, and agent sub-channels, while strategic investments in customer acquisition continue to enhance the Direct channel.
Prudent control of fixed expenses combined with targeted marketing investments is expected to further improve margins. Additionally, the planned refinancing of the debt facility with BlackRock in October 2024 is projected to cut interest costs by 50% in 2025, supporting ongoing net margin growth.
The insurer has successfully maintained its gross loss ratio below the long-term target of 60-65%, enabling selective rate cuts while sustaining the desired returns. Root’s strong business model has delivered some of the industry’s best loss ratios. Its net margin has improved significantly, expanding by 15,350 basis points over the past three years. Notably, 2024 marked a milestone as the company achieved profitability for the first time.
ROOT’s Return on Capital
Return on equity (ROE) in the trailing 12 months was 38.2%, outperforming the industry average of 7.7%. ROE, a profitability measure, reflects how effectively a company is utilizing its shareholders’ funds. It is noteworthy that ROOT has been generating improved ROE.
Image Source: Zacks Investment Research
The same holds true for return on invested capital (ROIC), which has been improving over time. This reflects ROOT’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 16.7%, higher than the industry average of 5.9%.
Image Source: Zacks Investment Research
Analysts’ Optimism Instills Confidence in ROOT
The Zacks Consensus Estimate for 2025 and 2026 earnings has moved 219.8% and 136.8% north, respectively, in the past 60 days, reflecting investor optimism.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for 2025 and 2026 earnings implies a 105.2% and 14.1% year-over-year increase, respectively. The company has a Growth Score of A.
What to Do With ROOT Shares Now?
ROOT intends to continue to invest in business, technology and growth in the second half of 2025, which might impact its near-term net income profitability. However, these near-term investments will eventually help it grow market share, sustainably expand margins over the long term and create shareholder value. A VGM Score of B instill confidence.
Image: Bigstock
ROOT Loses 33% in 3 Months, Trades at a Premium: How to Play the Stock
Key Takeaways
Shares of Root Inc. (ROOT - Free Report) have lost 32.9% in the past three months compared with the industry’s decline of 0.6%. In the meantime, the sector has risen 6.8% and the Zacks S&P 500 composite has gained 9.1%.
ROOT, a provider of automobile and renters insurance products, envisions being the largest and most profitable personal lines insurance carrier in the United States.
It has been trading below its 50-day simple moving average (SMA), signaling a short-term bearish trend. The 50-day SMA is a key indicator for traders and analysts to identify support and resistance levels. It is considered particularly important as it is the first marker of an uptrend or a downtrend.
ROOT Vs Industry, Sector & S&P 500
Image Source: Zacks Investment Research
Shares of its peer Lemonade (LMND - Free Report) have gained 50.8%, while those of another peer, EverQuote (EVER - Free Report) , have lost 4.2% in the past three months.
Lemonade is pursuing growth by acquiring profitable businesses and prioritizing its car insurance segment, which it expects to be a key driver of growth. Alongside diversification into renters, homeowners, pet, and life insurance, the company seeks to expand its market presence. Leveraging technology and AI for efficiency and a competitive edge, Lemonade aims to scale operations and achieve significant expansion. Lemonade has set a target of growing in-force premiums by 28% in 2025, supporting its ambition of tenfold growth.
EverQuote, an online insurance marketplace, sees strong potential from the recovery in auto insurance carrier demand and is actively expanding into new verticals. The company expects to capitalize on the growing shift toward online insurance sales, supported by rising consumer traffic, increased quote requests and innovative advertiser offerings. These factors are anticipated to drive its performance, with EverQuote projecting third-quarter 2025 revenues in the range of $163 million to $169 million, reflecting its growth momentum and strategic positioning.
ROOT Shares Are Expensive
Root shares trade at a price-to-book value ratio of 5.83, above the industry average of 1.57.
Image Source: Zacks Investment Research
The company has a Value Score of B.
Average Target Price for ROOT Suggests Downside
Based on short-term price targets offered by five analysts, the Zacks average price target is $130.60 per share. The average suggests a 41.6% upside from the last closing price.
What's Driving ROOT?
ROOT is heavily leaning on technology to improve pricing, one of the strategic pillars of growth, and is thus building on AI and machine learning for improving its pricing. This also helped partnership channel new writings grow nearly three times year over year. The insurer launched a new pricing model in several states during the second quarter of 2025.
ROOT believes it is yet to grow in the massive market. Its growth plan focuses on expansion across three key areas – state expansion, channel expansion and partnerships. Its growth strategy emphasizes geographic expansion, diversification of distribution channels and targeted investments in high-return opportunities, leading to a consistent increase in policies in force.
To expand its addressable market with independent agents, the company recently launched Root Insurance through the industry’s two largest comparative raters, EZLynx and PL Rating.
Growth in the Partnership channel is being driven by expansion across automotive, financial services, and agent sub-channels, while strategic investments in customer acquisition continue to enhance the Direct channel.
Prudent control of fixed expenses combined with targeted marketing investments is expected to further improve margins. Additionally, the planned refinancing of the debt facility with BlackRock in October 2024 is projected to cut interest costs by 50% in 2025, supporting ongoing net margin growth.
The insurer has successfully maintained its gross loss ratio below the long-term target of 60-65%, enabling selective rate cuts while sustaining the desired returns. Root’s strong business model has delivered some of the industry’s best loss ratios. Its net margin has improved significantly, expanding by 15,350 basis points over the past three years. Notably, 2024 marked a milestone as the company achieved profitability for the first time.
ROOT’s Return on Capital
Return on equity (ROE) in the trailing 12 months was 38.2%, outperforming the industry average of 7.7%. ROE, a profitability measure, reflects how effectively a company is utilizing its shareholders’ funds. It is noteworthy that ROOT has been generating improved ROE.
Image Source: Zacks Investment Research
The same holds true for return on invested capital (ROIC), which has been improving over time. This reflects ROOT’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 16.7%, higher than the industry average of 5.9%.
Image Source: Zacks Investment Research
Analysts’ Optimism Instills Confidence in ROOT
The Zacks Consensus Estimate for 2025 and 2026 earnings has moved 219.8% and 136.8% north, respectively, in the past 60 days, reflecting investor optimism.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for 2025 and 2026 earnings implies a 105.2% and 14.1% year-over-year increase, respectively. The company has a Growth Score of A.
What to Do With ROOT Shares Now?
ROOT intends to continue to invest in business, technology and growth in the second half of 2025, which might impact its near-term net income profitability. However, these near-term investments will eventually help it grow market share, sustainably expand margins over the long term and create shareholder value. A VGM Score of B instill confidence.
Despite its premium valuation, investors can add this Zack Rank #1 (Strong Buy) stock for high returns on their investments. You can see the complete list of today’s Zacks #1 Rank stocks here.