Root, Inc. (NASDAQ:ROOT) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The analysts have sharply increased their revenue numbers, with a view that Root will make substantially more sales than they'd previously expected.
Following the upgrade, the latest consensus from Root's seven analysts is for revenues of US$298m in 2023, which would reflect a reasonable 2.8% improvement in sales compared to the last 12 months. Losses are presumed to reduce, shrinking 19% per share from last year to US$11.26. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$270m and losses of US$11.58 per share in 2023. We can see there's definitely been a change in sentiment in this update, with the analysts administering a sizeable upgrade to this year's revenue estimates, while at the same time reducing their loss estimates.
The consensus price target rose 18% to US$8.50, with the analysts encouraged by the higher revenue and lower forecast losses for this year.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Root's past performance and to peers in the same industry. For example, we noticed that Root's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 5.7% growth to the end of 2023 on an annualised basis. That is well above its historical decline of 7.7% a year over the past three years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 5.1% annually. So it looks like Root is expected to grow at about the same rate as the wider industry.
The Bottom Line
The highlight for us was that the consensus reduced its estimated losses this year, perhaps suggesting Root is moving incrementally towards profitability. They also upgraded their revenue forecasts, although the latest estimates suggest that Root will grow in line with the overall market. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at Root.
Analysts are clearly in love with Root at the moment, but before diving in - you should be aware that we've identified some warning flags with the business, such as dilutive stock issuance over the past year. You can learn more, and discover the 2 other warning signs we've identified, for free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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