Root Inc. (NASDAQ:ROOT) soared 150% on Wednesday after it reported its first ever net profit profitability, largely due to a massive increase in revenue for the quarter.
This is a major milestone for Root. The auto insurance company told its investors last night that this was a “milestone” and not a finish line.
Root attributes its strength to the third quarter’s lower costs.
In Q3, the Ohio-based company also refinanced its debt and reduced it by 50% to reduce interest.
This morning, Root Stock topped $100 compared to just above $7.0 in early February.
Stocks Root jump on Q3 market beating results
Root’s recently completed quarter saw it earn $1.35 per share – a significant improvement over the $3.16 lost last quarter and 93c analysts expected.
The company’s revenues grew by 165% annually, bringing them to 306 million dollars in Q3, compared with the experts who had estimated only $273 million.
Root plans to use its profits for reinvestment in “growth engines both in direct/partnerships as well as indirect channels.”
Alex Timm, the chief executive of the company said that it will also continue to test other areas of its marketing funnels in the coming months.
The earnings announcement also includes a number of other notable figures, including a 57% increase year-on-year in policies, as well as a 48.8% increase in premiums and a 89% rise in the gross combined ratio.
First licensed US insurance company ended the third quarter with cash and equivalents of $675 millions. Root does not pay dividends and is therefore not suitable for income investors.
What else could be driving Root’s share price today?
The Root Share Price is also gaining in writing because management has successfully refinance its term loan with BlackRock, a NY-based company.
According to the Insurance Technology Company, the move will increase its financial flexibility and lower the cost of equity to “further accelerate our profit trajectory by lowering interest expenses on a running basis by approximately 50%.”
According to the letter sent to its shareholders Thursday, Root still has $150 million available under the amended loan.
Wall Street has given Root a “overweight rating” by consensus.
Analysts have a price target average of $71 for the insurer, which is well below its current price after the release of earnings on Thursday.
The post Root Stock Spikes 150%: Here’s What Investors Need to Know may be updated as new information becomes available.
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