Assessing Root (ROOT) Valuation After Recent Share Price Pullback and Longer-Term Gains

Root (ROOT) has quietly delivered a mixed run for shareholders, with gains this year but a drop over the past 3 months. That uneven performance is pushing investors to revisit its fundamentals.

See our latest analysis for Root.

The recent pullback, including a weak 90 day share price return, sits awkwardly against Root’s positive year to date share price gain and powerful three year total shareholder return. This suggests momentum has cooled while long term believers remain firmly in the green.

If Root’s swings have you reassessing your watchlist, this could be a good moment to explore fast growing stocks with high insider ownership as potential next wave candidates.

With Root now trading well below analyst targets despite solid revenue and earnings growth, investors have to ask: is this a mispriced turnaround still flying under the radar, or is the market already reflecting its future upside?

Most Popular Narrative Narrative: 35.4% Undervalued

With Root last closing at $80.39 against a narrative fair value of $124.40, the implied upside rests heavily on aggressive but specific growth assumptions.

The rapid iteration and deployment of Root's next-generation AI and machine learning pricing models have materially improved risk segmentation and increased customer lifetime value by over 20%, positioning the company to enhance future gross margins and net income as loss ratios improve.

Ongoing investment in data science capabilities and the ability to assimilate proliferating data sources enable Root to continuously refine their underwriting accuracy and claims efficiency, which is expected to contribute to improved loss ratios and operating leverage over time, bolstering future earnings.

Read the complete narrative.

Want to see how this pricing engine translates into a much richer future profit profile and premium valuation multiple, despite only modest headline growth expectations? Read on.

Result: Fair Value of $124.40 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, this upside rests on fragile foundations. Intensifying digital competition and potential regulatory shifts are both capable of quickly eroding Root’s margin and growth story.

Find out about the key risks to this Root narrative.

Another View on Value

While the narrative fair value points to upside, the basic earnings multiple tells a different story. Root trades on about 23 times earnings, far above its fair ratio of 15.7 times, the peer average of 12 times, and the US insurance industry at 12.8 times. That gap suggests valuation downside risk if sentiment or growth wobbles, so investors may be paying tomorrow’s price today.

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Root Narrative

If you see the story differently or want to test your own assumptions against the numbers, you can build a complete narrative in minutes: Do it your way.

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Root.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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