Root vs. MS&AD Insurance Group Holdings: Which Insurance Stock is a Better Choice?

Insurance stocks lack the intrigue and excitement of high-flying tech stocks, yet some companies operating in the insurance space are highly investable. Insurance providers will always attract investors to a certain extent simply because these businesses have a dependable source of revenue that is always in demand. Some industry innovators within the space are evolving and disrupting the competition with highly idiosyncratic business models.

Instead of investing in the top insurance companies that advertise on TV and radio, expand your search to some of the industry's lesser-known players. Continue researching this segment, and you will find more than a couple of insurance companies with considerable merit.

Root (ROOT) and MS&AD Insurance Group Holdings (MSADY) are two publicly traded insurance companies most retail investors aren't aware of, mainly because the mainstream investing media shies away from the comparably boring insurance space. Below, I provide a closer look at these insurance providers.

Root (ROOT)

ROOT is a tech business that has disrupted the personal insurance segment with a unique pricing model. Headquartered in Columbus, Ohio, ROOT went public nearly one year ago, debuting at around $23. The stock now trades at less than one-third of this initial price. Take a close look at ROOT's earnings reports, and you will find the losses are quickly mounting. However, ROOT's quest to remove credit scores from insurance coverage pricing using artificial intelligence and data is certainly commendable.

ROOT is a POWR Ratings dud with an overall grade of F, which translates into a Strong Sell rating. ROOT has a grade of F in the Sentiment, Value, and Stability components a D in the Growth component. Investors can find out how ROOT grades in the Quality and Momentum components by clicking here.

Of the 57 stocks in the Insurance - Property & Casualty industry, ROOT is ranked second to last, slotting in at 56th. Click here to find the top stocks in this industry.

The average analyst price target for ROOT is $9.46. If the stock reaches this price point, it will have popped by more than 48%. However, I would be remiss if I didn't highlight the analysts' average target price for the stock has declined by $14.27 in the past 38 weeks. 

MS&AD Insurance Group Holdings (MSADY)

MSADY provides life insurance along with overseas insurance and additional forms of insurance. The company writes policies ranging from marine to auto, casualty, fire, and beyond. Headquartered in Tokyo, Japan, MSADY has a forward P/E ratio of 7.47. This low ratio indicates that the stock is very undervalued.

MSADY is trading three cents below its 52-week high of $17.02, while its low is $13.17. MSADY has a beta of 0.52, which means it is half as volatile as the market. It is also worth noting MSADY pays a dividend of 3.05%.

MSADY has an overall grade of B, translating into a Buy rating in our POWR Ratings system. The stock has grades of B in the Value, Sentiment, and Stability components. Click here to find out how MSADY grades in the rest of the components, including Momentum, Quality, and Growth.

Out of the 57 stocks in the Insurance - Property & Casualty industry, MSADY cracks the top 10, coming in at number eight. 

Which Insurance Stock is Better?

MSADY is clearly superior to ROOT. Aside from having a top-10 industry rank, MSADY has a better overall POWR Rating. Plus, its highly graded component grades also bode well.

ROOT shares fell $0.03 (-0.48%) in after-hours trading Thursday. Year-to-date, ROOT has declined -60.28%, versus a 22.01% rise in the benchmark S&P 500 index during the same period.

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.

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