Root, Inc. (NASDAQ:ROOT) Aligns with Navellier’s Growth Stock Criteria for High-Performance Investing

Louis Navellier’s The Little Book That Makes You Rich presents a structured method for finding high-growth stocks using eight key factors. These factors include earnings updates, unexpected results, sales and profit increases, wider operating margins, solid cash flow, profit momentum, and return on equity. The approach seeks to identify firms with rising profitability and operational effectiveness, which are important for long-term stock success. Root, Inc. (NASDAQ:ROOT) appears to meet many of these factors, positioning it as a possible choice for investors focused on growth.

How Root, Inc. Matches Navellier’s Growth Factors

1. Upward Earnings Updates
   Analysts have increased Root’s next-quarter EPS forecasts by 433.09% in the last three months, a clear sign that Wall Street expects better profits. Navellier notes that rising updates often predict future earnings strength, as analysts usually adjust estimates cautiously unless business trends support optimism.

2. Unexpected Earnings Results
   Root has surpassed EPS forecasts in each of the past four quarters, with an average surprise of 223.67%. Regular outperformance indicates strong management, a trait of growth stocks. Navellier points out that repeated surprises can lead analysts to raise future estimates, creating a positive cycle for the stock.

3. Rising Sales Growth
   Root’s revenue increased 158.57% year-over-year (TTM), with quarterly sales up 32.86% compared to the same period last year. Growing top-line performance is vital for Navellier’s method, as it shows increasing market presence or pricing ability.

4. Wider Operating Margin
   The firm’s operating margin rose by 185.34% over the past year, reflecting better cost management and scalability. Navellier values margin growth as it shows a company’s ability to turn higher sales into greater profits.

5. Solid Cash Flow
   Root’s free cash flow jumped 178.07% year-over-year, indicating better financial flexibility. Strong cash generation supports reinvestment and reduces the need for outside funding, a key part of Navellier’s approach.

6. Profit Growth
   EPS grew 187.28% year-over-year (TTM), with the latest quarter up 348.08%. Navellier looks for firms where profits grow faster than sales, signaling operational efficiency.

7. Positive Profit Momentum
   Root’s current quarterly EPS growth (348.08%) is much higher than its growth from the same quarter a year ago (79.61%). This speed aligns with Navellier’s focus on momentum, as it suggests improving business conditions.

8. High Return on Equity (ROE)
   Root’s ROE of 13.71% ranks it in the top 30% of its insurance industry peers. Navellier prefers high ROE as it shows effective use of shareholder funds.

Key Fundamentals

Root’s fundamental analysis report shows a mix of improving metrics:

• Profitability: Narrow margins (operating margin of 8.06%) but strong recent EPS and sales growth.
• Financial Health: A low Altman-Z score (0.17) suggests bankruptcy risk, but a manageable debt-to-FCF ratio (1.00) eases concerns.
• Valuation: P/E of 17.64 is above industry averages, but growth (37.55% forward EPS) may support the higher price.

Final Thoughts

Root’s rapid profit and sales growth, along with rising updates and margin expansion, make it an interesting option for investors using Navellier’s factors. However, its weak liquidity (current ratio of 0.37) and high valuation multiples call for careful consideration.

For more stocks filtered by this method, check the Little Book Growth Stock Screen.

Disclaimer: This analysis is not investment advice. Do your own research or consult a financial expert before making decisions.