Root, Inc. (NASDAQ:ROOT) shareholders would be excited to see that the share price has had a great month, posting a 74% gain and recovering from prior weakness. The last 30 days were the cherry on top of the stock's 588% gain in the last year, which is nothing short of spectacular.

Although its price has surged higher, there still wouldn't be many who think Root's price-to-sales (or "P/S") ratio of 1x is worth a mention when the median P/S in the United States' Insurance industry is similar at about 1.1x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

What Does Root's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, Root has been doing relatively well. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

Is There Some Revenue Growth Forecasted For Root?

The only time you'd be comfortable seeing a P/S like Root's is when the company's growth is tracking the industry closely.

Taking a look back first, we see that the company grew revenue by an impressive 215% last year. The strong recent performance means it was also able to grow revenue by 245% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 12% each year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 5.1% per year, which is noticeably less attractive.

With this in consideration, we find it intriguing that Root's P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What We Can Learn From Root's P/S?

Root's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Despite enticing revenue growth figures that outpace the industry, Root's P/S isn't quite what we'd expect. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Before you settle on your opinion, we've discovered 4 warning signs for Root (2 don't sit too well with us!) that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.