Root, Inc.'s (NASDAQ:ROOT) Shift From Loss To Profit

Root, Inc. (NASDAQ:ROOT) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Root, Inc. provides insurance products and services in the United States. The US$1.3b market-cap company posted a loss in its most recent financial year of US$147m and a latest trailing-twelve-month loss of US$16m shrinking the gap between loss and breakeven. The most pressing concern for investors is Root's path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.

View our latest analysis for Root

Consensus from 6 of the American Insurance analysts is that Root is on the verge of breakeven. They anticipate the company to incur a final loss in 2025, before generating positive profits of US$20m in 2026. Therefore, the company is expected to breakeven just over a year from today. How fast will the company have to grow each year in order to reach the breakeven point by 2026? Working backwards from analyst estimates, it turns out that they expect the company to grow 119% year-on-year, on average, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

We're not going to go through company-specific developments for Root given that this is a high-level summary, though, bear in mind that generally a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we would like to bring into light with Root is its debt-to-equity ratio of 102%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of Root to cover in one brief article, but the key fundamentals for the company can all be found in one place – Root's company page on Simply Wall St. We've also put together a list of relevant aspects you should further examine:

1. Historical Track Record: What has Root's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Root's board and the CEO’s background.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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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.