Root has gotten torched over the last six months - since September 2025, its stock price has dropped 55% to $44.57 per share. This might have investors contemplating their next move.
Is now the time to buy Root, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Root Not Exciting?
Even with the cheaper entry price, we're cautious about Root. Here are two reasons there are better opportunities than ROOT and a stock we'd rather own.
1. Growing BVPS Reflects Strong Asset Base
For insurers, book value per share (BVPS) is a vital measure of financial health, representing the total assets available to shareholders after accounting for all liabilities, including policyholder reserves and claims obligations.
Although Root’s BVPS declined at a 24.6% annual clip over the last five years. the good news is that its growth inflected positive over the past two years as BVPS grew at an incredible 26.7% annual clip (from $11.43 to $18.34 per share).
2. Previous Growth Initiatives Have Lost Money
Return on equity, or ROE, represents the ultimate measure of an insurer's effectiveness, quantifying how well it transforms shareholder investments into profits. Over the long term, insurance companies with robust ROE metrics typically deliver superior shareholder returns through a balanced approach to capital management.
Over the last five years, Root has averaged an ROE of negative 29.7%, a bad result not only in absolute terms but also relative to the majority of insurers putting up 20%+. It also shows that Root has little to no competitive moat.
Final Judgment
Root isn’t a terrible business, but it doesn’t pass our bar. Following the recent decline, the stock trades at 1.9× forward P/B (or $44.57 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - you can find more timely opportunities elsewhere. Let us point you toward the most dominant software business in the world.
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