Contrasting RLI (NYSE:RLI) and Root (NASDAQ:ROOT)

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

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	3.58%	19.97%	3.39%

Risk and Volatility

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

Institutional and Insider Ownership

77.9% of RLI shares are owned by institutional investors. Comparatively, 59.8% of Root shares are owned by institutional investors. 2.4% of RLI shares are owned by company insiders. Comparatively, 12.0% of Root shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Analyst Ratings

This is a breakdown of recent ratings and target prices for RLI and Root, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
RLI	0	6	0	1	2.29
Root	1	4	2	0	2.14

RLI presently has a consensus price target of $61.50, suggesting a potential upside of 25.41%. Root has a consensus price target of $93.60, suggesting a potential upside of 65.93%. Given Root’s higher probable upside, analysts clearly believe Root is more favorable than RLI.

Earnings & Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
RLI	$1.88 billion	2.40	$403.34 million	$4.28	11.46
Root	$1.52 billion	0.58	$40.30 million	$3.34	16.89

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.

Summary

RLI beats Root on 9 of the 15 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.