Critical Contrast: Palomar (NASDAQ:PLMR) & Root (NASDAQ:ROOT)

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

Risk and Volatility

Palomar has a beta of 0.44, meaning that its share price is 56% less volatile than the S&P 500. Comparatively, Root has a beta of 2.76, meaning that its share price is 176% more volatile than the S&P 500.

Institutional & Insider Ownership

90.3% of Palomar shares are held by institutional investors. Comparatively, 59.8% of Root shares are held by institutional investors. 3.7% of Palomar shares are held by company insiders. Comparatively, 11.8% of Root shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Earnings and Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Palomar	$775.98 million	4.50	$117.57 million	$6.41	20.54
Root	$1.45 billion	0.63	$30.90 million	$3.31	17.74

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Palomar	22.59%	21.93%	6.80%
Root	3.80%	23.36%	3.49%

Analyst Recommendations

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

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Palomar	0	2	7	0	2.78
Root	1	5	2	0	2.13

Palomar currently has a consensus target price of $158.14, indicating a potential upside of 20.13%. Root has a consensus target price of $121.60, indicating a potential upside of 107.05%. Given Root’s higher possible upside, analysts plainly believe Root is more favorable than Palomar.

Summary

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

About Palomar

Palomar Holdings, Inc., a specialty insurance company, provides property and casualty insurance to residential and businesses in the United States. The company offers personal and commercial specialty property insurance products, including residential and commercial earthquake, fronting, commercial all risk, specialty homeowners, inland marine, Hawaii hurricane, and residential flood, as well as other products, such as assumed reinsurance. It markets and distributes its products through retail agents, wholesale brokers, program administrators, and carrier partnerships. The company was formerly known as GC Palomar Holdings and changed its name to Palomar Holdings, Inc. The company was incorporated in 2013 and is headquartered in La Jolla, California.

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.