Lemonade has gotten torched over the last six months - since January 2026, its stock price has dropped 29.4% to $68.21 per share. This might have investors contemplating their next move.
Is there a buying opportunity in Lemonade, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Lemonade Not Exciting?
Even though the stock has become cheaper, we’re sitting this one out for now. Here are three reasons why LMND doesn’t excite us, plus one stock we’d rather own.
1. EPS Barely Improving Over the Last Two Years
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
For Lemonade, its two-year annual EPS growth of 17% was higher than its five-year trend. Its improving earnings are an encouraging data point, but a caveat is that its EPS is still in the red.
2. Declining BVPS Reflects Erosion of Asset Value
We consider book value per share (BVPS) a critical metric for insurance companies. BVPS represents the total net worth per share, providing insight into a company’s financial strength and ability to meet policyholder obligations.
To the detriment of investors, Lemonade’s BVPS declined at a 16.2% annual clip over the last two years.
3. Previous Growth Initiatives Have Lost Money
Return on equity, or ROE, represents the ultimate measure of an insurer’s effectiveness, quantifying how well it transforms shareholder investments into profits. Over the long term, insurance companies with robust ROE metrics typically deliver superior shareholder returns through a balanced approach to capital management.
Over the last five years, Lemonade has averaged an ROE of negative 30.1%, a bad result not only in absolute terms but also relative to the majority of insurers putting up 20%+. It also shows that Lemonade has little to no competitive moat.
Final Judgment
Lemonade isn’t a terrible business, but it doesn’t pass our quality test. Following the recent decline, the stock trades at 10.8× forward P/B (or $68.21 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We’re fairly confident there are better stocks to buy right now. Let us point you toward a fast-growing restaurant franchise with an A+ ranch dressing sauce.
Stocks We Would Buy Instead of Lemonade
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