Auto-insurance fallen-angel down 51% from 52W high while operations quietly hit inflection: TTM net income +$58M (record), combined ratio 92.1% (–3pp YoY), $312M net cash covers 44% of market cap. Trading at 0.27x EV/Revenue and 4.6x EV/EBITDA — genuine dislocation with a hard cash floor. Q4 2026 predictive pricing rollout and OEM embedded-insurance ramp (Carvana, Hyundai, Jerry) are dated re-rating catalysts.
EV/EBITDA on FY27E is the primary anchor because ROOT is now a profitable P&C insurer with an established combined-ratio trajectory (92.1%). Nominal multiple 6.5x = Kemper 8.5x haircut for size and short profitability track record. Implicit multiple check confirms 7.3x (±12% vs nominal). Cross-check P/S fw 0.72x matches Kemper exactly. Sensitivity: ±2x on EV/EBITDA moves FV by ±$14 (±20%). Cash floor ($20/share) caps downside in an aggressive market repricing. ⚠️ Not investment advice.
| Component | Assumption | USD/share |
|---|---|---|
| Core insurance business (EV) | FY27E EBITDA $110M × 6.5x EV/EBITDA (haircut vs Kemper 8.5x for size) / 15.49M shares | +$46.16 |
| Net cash on balance sheet | $311.8M cash − $0 gross debt (post $200M facility refi) / 15.49M shares | +$20.12 |
| Investment income upside | $500M float × 200bps yield uplift × 5.0x mult = $50M NPV / 15.49M shares | +$3.23 |
| OEM/embedded partnership option | 30% prob × ($100M Carvana + $50M Hyundai/Jerry NPV) = $45M / 15.49M shares | +$2.90 |
| Predictive pricing v2 uplift | 25% prob × $60M NPV (from prior model LTV +20%) / 15.49M shares | +$0.97 |
| Buyback net of dilution | $20M executed buyback − $15M SBC / 15.49M shares | +$0.32 |
| Reinsurance/reserve haircut | −$25M expected adverse development / 15.49M shares (conservative) | −$1.61 |
| FV base case | Arithmetic sum of rows above | ≈ $72.09 |
Short interest is moderate (8.5%) — not a crowded short, but skeptics remain on GWP deceleration risk. A material combined-ratio improvement or partnership acceleration could produce meaningful positive catalyst asymmetry given the modest float (~13.7M shares). No insider selling >$500K flagged in the last 12 months; management (CEO Alex Timm) has kept material stake through the drawdown.
| Item | FY2022 | FY2023 | FY2024 | FY2025 | Guidance 2026E |
|---|---|---|---|---|---|
| Revenue ($M) | 310.8 | 455.0 | 1,180.0 | 1,520.0 | ~1,550 |
| Revenue growth % | −10% | +46% | +159% | +29% | ~+2% |
| Gross Written Premium ($M) | — | ~500 | ~1,300 | ~1,410 | ~1,380 (flat) |
| Net income ($M) | −416.0 | −147.0 | +29.2 | +38.3 | ~73 (EPS ~$4.74) |
| Combined ratio | 130%+ | ~110% | ~98% | ~94% | ~92% |
| Cash & investments ($M) | ~750 | ~600 | ~450 | ~380 | ~312 |
| Shares outstanding (M) | 13.8 | 14.5 | 15.7 | 16.2 | 15.49 |
| Metric | Q2 2025 | Q3 2025 | Q4 2025 | Q1 2026 | Q2 2026 |
|---|---|---|---|---|---|
| Revenue ($M) | 382.8 | 398.0 | 404.0 | 396.5 | 389.2 |
| Gross Written Premium ($M) | 346.9 | 355.0 | 365.0 | 355.0 | 340.0 |
| Net income ($M) | +21.7 | +8.0 | −0.3 | +32.6 | +25.0 |
| Combined ratio % | 95.1% | 96.5% | 99.0% | 91.5% | 92.1% |
| Policies in force (K) | 457 | 467 | 475 | 481 | 484 |
| Cash EOP ($M) | 355 | 340 | 325 | 318 | 312 |
Business model — Tech-enabled auto insurer
Direct (D2C app) ~$620-680M FY26E GWP (~50% of mix) 🟡 flat to test Legacy channel via mobile app + Test Drive telematics. Rising CAC has forced management to throttle new writings; policies in force stabilizing rather than growing. Loss ratio target ~55% on renewals. Independent agents ~$400-450M FY26E GWP (~30% of mix) 🟢 ramping Fastest-growing channel, now 30% of new writings vs 44% partnerships. Traditional broker distribution at low incremental CAC. Structural driver of scale in 2027-28. Partnerships / OEM embedded ~$280-320M FY26E GWP (~21% of mix) 🟢 ramping Carvana embedded insurance at car purchase (April 2026 launch), Hyundai OEM tie-in, Jerry aggregator (Q3 2026). Highest LTV/CAC ratio because acquisition is at point-of-need. Optionality on TSLA/other OEM.
Legal, regulatory and risk analysis
SWOT analysis
- +Net cash $312M (44% of mkt cap) — hard floor and buyback dry powder
- +TTM net income $58M (record), positive since FY24 — profitability track record
- +Combined ratio 92.1% (–3pp YoY) competitive with mainstream P&C incumbents
- +Proprietary telematics-based pricing model — real IP, LTV +20% per iteration
- +3-channel distribution (Direct, Agents, OEM) — reduces channel concentration
- −GWP declined 2% YoY in Q2 2026 — growth story is under interruption
- −Small scale ($1.5B revenue) vs $70B+ PGR/GEICO — higher CR volatility
- −Micro float (13.7M shares) creates price volatility, deters institutional buyers
- −Profitability track record only 2 full years — investors demand longer runway
- →Predictive pricing v2 rollout Q4 2026 — dated re-rating catalyst
- →Independent agent channel scaling — 30% of new writings and growing
- →OEM embedded insurance megatrend (Carvana, Hyundai, potential TSLA/Uber)
- →Re-rating from 0.46x P/S fw to 0.7-0.8x (Kemper-comparable) worth +50-70%
- →Interest rate environment supports investment income on $500M+ float
- !Regulatory pushback on telematics pricing (potential class disparate impact suits)
- !Weather cat losses in Q3-Q4 could compress combined ratio 200-300bps
- !Reinsurance market hardening — coverage cost pressure on 2027 renewals
- !Competitive pressure from PGR/GEICO on renewal pricing forcing GWP contraction
Summary by assessment area
- Net cash $312M, no debt after refi
- TTM net income +$58M (record)
- Combined ratio 92.1%, improving
- Buyback active, shares −4.2% YoY
- GWP −2% YoY, growth stall risk
- Small scale vs incumbents
- Pricing model v2 needs to deliver
- Regulatory pricing sensitivity
- FV $72 vs $46.02 = +56% base upside
- Cash floor $20/share limits downside
- Ratio upside/downside: ≈2.5x-4x
- Dated catalysts Q4 2026 / Q1 2027
Sources: StockAnalysis.com, Yahoo Finance, Google Finance, TwelveData (price cross-check), Root IR (Q2 2026 earnings, shareholder letters), Insurance Journal, Investing.com (analyst forecasts and Q1/Q2 earnings transcripts), Simply Wall St (financial history), Seeking Alpha commentary. Market data — last verified close 2026-09-29 (T-1 trading day): ROOT ~$46.02, market cap ~$713M, 52W range: $40.91 – $94.04, shares outstanding 15.49M, net cash $311.8M, book value/share $21.15. Short interest ~8.5%. Analyst consensus (Aug 2026): avg $60.20, high $80, low $50 (6 analysts, Hold). ⚠️ This document is for informational purposes only and does not constitute financial or investment advice.