RLI (NYSE:RLI) versus Root (NASDAQ:ROOT) Financial Analysis

RLI (NYSE:RLI) and Root (NASDAQ:ROOT) are both finance companies, but which is the better business? We will contrast the two businesses based on the strength of their institutional ownership, valuation, analyst recommendations, profitability, dividends, earnings and risk.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for RLI and Root, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
RLI	0	6	0	1	2.29
Root	0	5	2	0	2.29

RLI currently has a consensus target price of $61.50, indicating a potential upside of 19.34%. Root has a consensus target price of $92.40, indicating a potential upside of 67.85%. Given Root’s higher probable upside, analysts clearly believe Root is more favorable than RLI.

Earnings & Valuation

This table compares RLI and Root”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
RLI	$1.88 billion	2.52	$403.34 million	$4.28	12.04
Root	$1.52 billion	0.56	$40.30 million	$2.32	23.73

RLI has higher revenue and earnings than Root. RLI is trading at a lower price-to-earnings ratio than Root, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares RLI and Root’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
RLI	20.81%	17.72%	5.13%
Root	2.58%	15.34%	2.42%

Risk and Volatility

RLI has a beta of 0.42, suggesting that its share price is 58% less volatile than the S&P 500. Comparatively, Root has a beta of 2.95, suggesting that its share price is 195% more volatile than the S&P 500.

Institutional and Insider Ownership

77.9% of RLI shares are held by institutional investors. Comparatively, 59.8% of Root shares are held by institutional investors. 2.4% of RLI shares are held by company insiders. Comparatively, 11.8% of Root shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Summary

RLI beats Root on 9 of the 14 factors compared between the two stocks.

About RLI

RLI Corp., an insurance holding company, underwrites property and casualty insurance. Its Casualty segment provides commercial and personal coverage products; and general liability products, such as coverage for third-party liability of commercial insureds, including manufacturers, contractors, apartments, and mercantile. It also offers coverages for security guards and environmental liability for underground storage tanks, contractors and asbestos, and environmental remediation specialists; and professional liability coverages for errors and omission coverage for small to medium-sized design, technical, computer, and miscellaneous professionals. This segment provides commercial automobile liability and physical damage insurance to local, intermediate and long haul truckers, public transportation entities, and other types of specialty commercial automobile risks; incidental and related insurance coverages; inland marine coverages; management liability coverages, such as directors and officers liability insurance, fiduciary liability and coverages, employment practice liability, and for various classes of risks, including public and private businesses; and home business insurance products. The company's Property segment offers commercial property, cargo, hull, protection and indemnity, marine liability, inland marine, homeowners' and dwelling fire, and other property insurance products. Its Surety segment offers commercial surety bonds for medium to large-sized businesses; small bonds for businesses and individuals; and bonds for small to medium-sized contractors. The company also engages in various reinsurance coverages. It markets its products through branch offices, wholesale and retail brokers, carrier partners, and underwriting and independent agents. RLI Corp. was incorporated in 1965 and is headquartered in Peoria, Illinois.

About Root

Root, Inc. provides insurance products and services in the United States. The company offers automobile, homeowners, and renters insurance products. It operates a direct-to-consumer model; and serves customers primarily through mobile applications, as well as through its website. The company's direct distribution channels also cover digital, media, and referral channels, as well as distribution partners and agencies. Root, Inc. was incorporated in 2015 and is headquartered in Columbus, Ohio.