Contrasting Root (NASDAQ:ROOT) and American Coastal Insurance (NASDAQ:ACIC)

American Coastal Insurance (NASDAQ:ACIC) and Root (NASDAQ:ROOT) are both small-cap finance companies, but which is the better business? We will contrast the two companies based on the strength of their valuation, earnings, analyst recommendations, institutional ownership, dividends, profitability and risk.

Profitability

This table compares American Coastal Insurance and Root’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
American Coastal Insurance	25.95%	30.06%	6.84%
Root	3.80%	23.36%	3.49%

Earnings & Valuation

This table compares American Coastal Insurance and Root”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
American Coastal Insurance	$296.66 million	2.08	$75.72 million	$1.71	7.39
Root	$1.18 billion	0.95	$30.90 million	$3.31	21.82

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

Volatility and Risk

American Coastal Insurance has a beta of -0.55, suggesting that its share price is 155% less volatile than the S&P 500. Comparatively, Root has a beta of 2.7, suggesting that its share price is 170% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for American Coastal Insurance and Root, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
American Coastal Insurance	0	0	1	0	3.00
Root	2	4	2	0	2.00

Root has a consensus target price of $125.80, suggesting a potential upside of 74.17%. Given Root’s higher possible upside, analysts plainly believe Root is more favorable than American Coastal Insurance.

Insider and Institutional Ownership

22.1% of American Coastal Insurance shares are owned by institutional investors. Comparatively, 59.8% of Root shares are owned by institutional investors. 49.9% of American Coastal Insurance shares are owned by insiders. Comparatively, 11.8% of Root shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

About American Coastal Insurance

American Coastal Insurance Corporation operates as a property and casualty insurance holding company that sources, writes, and services residential personal and commercial property, and casualty insurance policies in the United States. The company offers structure, content, and liability coverage for standard single-family homeowners, renters, and condominium unit owners. It also provides commercial multi-peril property insurance for residential condominium associations and apartments, as well as loss or damage to buildings, inventory, and equipment caused by fire, wind, hail, water, theft, and vandalism. In addition, the company offers equipment breakdown, identity theft, cyber security, and flood policies. The company markets and distributes its products through a network of independent agencies. The company was formerly known as United Insurance Holdings Corp. and changed its name to American Coastal Insurance Corporation in August 2023. American Coastal Insurance Corporation was founded in 1999 and is headquartered in Saint Petersburg, Florida.

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.