We came across a bullish thesis on Root, Inc. on The Cash Flow Compounder’s Substack. In this article, we will summarize the bulls’ thesis on ROOT. Root, Inc.’s share was trading at $80.89 as of November 28th. ROOT’s trailing and forward P/E were 24.07 and 3.11 respectively according to Yahoo Finance.
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Root, Inc. provides insurance products and services in the United States. The company offers automobile and renters insurance products. ROOT is transforming the insurance industry through its data-driven, mobile-first approach, leveraging telematics to price policies based on actual driving behavior rather than traditional demographics.
This proprietary model underpins a high-margin, recurring revenue business, with policies in force growing from $220 million to $415 million from 2022 to 2024, reflecting a 37% CAGR. Root has expanded into renters and homeowners insurance to increase customer lifetime value, and its digital-first platform enables lower operational costs and efficient claims processing.
The company’s management has substantial skin in the game, with insiders owning 11.6% of shares and performance-based compensation aligning executives with shareholders. Root benefits from a large U.S. auto insurance market, estimated at $300 billion, and secular trends favoring AI-driven, personalized, digital-first insurance solutions. Its asset-light model, stable margins, and improving net combined ratios demonstrate operational leverage and growing financial discipline, with net margin rising from -150% in 2021 to 3% in 2024 and positive free cash flow of $195 million in 2024.
Root is developing a durable competitive advantage through its proprietary AI and machine learning models, which analyze over 32 billion miles of driving data, creating a scalable and increasingly predictive risk-underwriting platform. While pricing power is still developing and the company faces regulatory and competitive risks, Root is achieving double-digit revenue growth, with a projected 14.5% CAGR through 2027, and maintains a strong balance sheet.
Scoring 16.5/22 on the Compounder Score, Root qualifies as a high-conviction business, offering a compelling growth and profitability story with operational execution that supports a potential deep-dive investment, albeit with slightly lower fundamental strength relative to faster-growing peers like Lemonade.
Previously we covered a bullish thesis on Root, Inc. (ROOT) by Creative-Cranberry47 in May 2025, which highlighted its strong Q1 beat, rapid policy growth, and expanding partnerships. The company’s stock price has depreciated approximately by 45.12% since our coverage. This is because the thesis didn’t fully play out. The thesis still stands as Root’s tech-first model remains intact. The Cash Flow Compounder shares a similar view but emphasizes Root’s data advantage and financial discipline.
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.
Alice J. Roden started working for Trending Insurance News at the end of 2021. Alice grew up in Salt Lake City, UT. A writer with a vast insurance industry background Alice has help with several of the biggest insurance companies. Before joining Trending Insurance News, Alice briefly worked as a freelance journalist for several radio stations. She covers home, renters and other property insurance stories.