Root, Inc. (NASDAQ:ROOT) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The analysts have sharply increased their revenue numbers, with a view that Root will make substantially more sales than they'd previously expected.
Following the latest upgrade, the seven analysts covering Root provided consensus estimates of US$277m revenue in 2021, which would reflect a concerning 20% decline on its sales over the past 12 months. Prior to the latest estimates, the analysts were forecasting revenues of US$249m in 2021. It looks like there's been a clear increase in optimism around Root, given the solid increase in revenue forecasts.
There was no particular change to the consensus price target of US$21.92, with Root's latest outlook seemingly not enough to result in a change of valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Root analyst has a price target of US$30.00 per share, while the most pessimistic values it at US$13.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Root's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 20% by the end of 2021. This indicates a significant reduction from annual growth of 19% over the last year. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 3.3% per year. It's pretty clear that Root's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The highlight for us was that analysts increased their revenue forecasts for Root this year. They also expect company revenue to perform worse than the wider market. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at Root.
Unsatisfied? At least one of Root's seven analysts has provided estimates out to 2025, which can be seen for free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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What are the risks and opportunities for Root?
Revenue is forecast to grow 7.84% per year
Does not have a meaningful market cap ($86M)
Volatile share price over the past 3 months
Currently unprofitable and not forecast to become profitable over the next 3 years
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