Root, Inc. (NASDAQ:ROOT) Reported Earnings Last Week And Analysts Are Already Upgrading Their Estimates

A week ago, Root, Inc. (NASDAQ:ROOT) came out with a strong set of quarterly numbers that could potentially lead to a re-rate of the stock. Revenue crushed expectations at US$255m, beating expectations by 28%. Root reported a statutory loss of US$0.42 per share, which - although not amazing - was much smaller than the analysts predicted. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Root

Following the latest results, Root's eight analysts are now forecasting revenues of US$1.02b in 2024. This would be a substantial 59% improvement in revenue compared to the last 12 months. Losses are expected to increase substantially, hitting US$8.32 per share. Before this earnings announcement, the analysts had been modelling revenues of US$927.6m and losses of US$9.04 per share in 2024. So there seems to have been a moderate uplift in analyst sentiment with the latest consensus release, given the upgrades to both revenue and loss per share forecasts for this year.

The consensus price target rose 29% to US$56.00, with the analysts encouraged by the higher revenue and lower forecast losses for next year. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Root analyst has a price target of US$103 per share, while the most pessimistic values it at US$11.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. The analysts are definitely expecting Root's growth to accelerate, with the forecast 85% annualised growth to the end of 2024 ranking favourably alongside historical growth of 18% per annum over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 5.9% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Root is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Happily, they also upgraded their revenue estimates, and are forecasting them to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Root going out to 2026, and you can see them free on our platform here..

It is also worth noting that we have found 3 warning signs for Root (1 can't be ignored!) that you need to take into consideration.

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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.