Root, Inc. (ROOT): A Bull Case Theory

We came across a bullish thesis on Root, Inc. on Rose’s Substack by Rose Celine Investments. In this article, we will summarize the bulls’ thesis on ROOT. Root, Inc.'s share was trading at $79.37 as of October 21st. ROOT’s trailing and forward P/E were 17.70 and 3.44 respectively according to Yahoo Finance.

Root, Inc. (ROOT) is a young car insurance company focused on simplifying the process of buying insurance, making it faster, easier, and more user-friendly. The company has multiple growth avenues: direct sales through its app or website, partnerships with companies like Carvana and Hyundai for seamless insurance integration, paid marketing channels despite higher customer acquisition costs, and enabling independent agents to sell policies using $ROOT’s technology, guaranteeing sales through commissions. While some highlight AI or telematics as key differentiators, $ROOT’s strength lies in simplicity, fair pricing, and good service, which positions it well in a large market relative to its size.

The company already leverages 32 billion miles of driving data to identify and eliminate high-risk drivers, resulting in some of the most attractive loss ratios in the industry. Its balance sheet is solid, with ample cash, manageable debt, and positive free cash flow, allowing the company to grow without diluting shareholders. Geographically, Root, Inc. (ROOT) operates in only 36 states, leaving substantial room for U.S. expansion, with future opportunities to cross-sell products like renters or pet insurance, enhancing growth efficiency.

The business faces risks from larger competitors or potential acquisition, but $ROOT does not need to become a market giant to succeed. Maintaining disciplined underwriting, attracting low-risk drivers, and scaling operations prudently could generate significant returns. With a forward single-digit P/E, low PEG, and ~$1.5 billion projected revenue, improvements in combined ratio from ~95% to ~80% could add $300 million in underwriting profit, highlighting significant upside. At a market cap of ~$1.4 billion, $ROOT offers a rare combination of profitability, strong management, and growth potential, presenting an asymmetric risk/reward opportunity.

Previously we covered a bullish thesis on Root, Inc. (ROOT) by Creative-Cranberry47 in May 2025, which highlighted breakout Q1 earnings, strong underwriting, rapid agency expansion, and potential for nationwide growth. The company's stock price has depreciated approximately by 46% since our coverage. The thesis still stands as ROOT’s scalable model and strong balance sheet remain intact. Rose Celine Investments shares a similar view but emphasizes simplicity and disciplined underwriting as key drivers.

Root, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 28 hedge fund portfolios held ROOT at the end of the second quarter which was 23 in the previous quarter. While we acknowledge the potential of ROOT as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.