Lemonade

Lemonade Inc earns a 3-star quantitative star rating, reflecting our opinion that this share class is a balanced choice, but prudent investors should consider looking elsewhere. The stock currently trades at a 19% discount to our quantitative fair value estimate of $57.29 per share; however, caution is warranted due to this estimate's high uncertainty rating.

The company's solid growth increases our quantitative valuation. Consistent revenue and earnings growth indicates a company's potential for increased market share and profitability. Reflecting the firm's growth is its revenue 3-year growth of 40.4%, which falls in the top 10% compared with global peers. Robust trailing three-year revenue growth portends a favorable future trajectory, which contributes to our view that shares are cheap.

Alternatively, the firm's lack of profitability is potentially concerning. Companies with low profitability are often less resilient in recessions and are likely to generate weaker future cash flows for shareholders. The firm's earnings yield of -2.1%, a core component of profitability, ranks in the bottom 30% compared with global peers. The earnings generated by the company relative to its share price is concerning, which, despite our favorable price/fair value ratio, is a negative attribute.

This company lacks a competitive advantage, receiving a quantitative economic moat rating of none. Additionally, the firm's moderate financial health score suggests it is acceptably positioned against adverse economic circumstances.