GSHD

We rate Goosehead Insurance, Inc. (GSHD) as Avoid with a composite score of 35.7/100 at a current price of $50.02. The stock falls in the bottom quintile of our universe across key quantitative factors, and the multi-factor weakness suggests a high probability of continued underperformance.

The rating is primarily driven by strength in quality (60th percentile) and value (48th percentile), which together account for the majority of the composite score. Offsetting weakness in momentum (6th percentile) and stability (21th percentile) tempers our overall conviction. We assign a Narrow Moat rating (55/100), Medium uncertainty, and Poor capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Goosehead Insurance, Inc. holds a top-quartile position (#0 of 50) within the Finance, Insurance, And Real Estate sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 35.7/100 places it at rank #4033 in our full 7,333-stock universe. At $2.8B in market capitalization, Goosehead Insurance, Inc. is a mid-cap player in the Finance, Insurance, And Real Estate space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue is growing at 16%, though momentum at the 6th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 46% (-30.5pp vs sector) narrow to operating margins of 17% (+0.5pp vs sector) and net margins of 10.6%, yielding a gross-to-net conversion rate of 23%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $50.02, Goosehead Insurance, Inc. is trading near fair value based on current fundamentals. Our value factor score of 48/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 30.6x (a 156% premium to the sector median of 11.9x), EV/EBITDA of 18.5x (at a premium), P/S of 3.3x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a Medium uncertainty rating to Goosehead Insurance, Inc.. The stock presents a balanced risk profile: below-average price stability (21th percentile). While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: below-average price stability (21th percentile). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 21th percentile and quality factor at the 60th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 46% provide a buffer against cost pressures; a 7.94% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Goosehead Insurance, Inc.'s capital allocation as Poor. Key concerns include low returns on equity (-77.0%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Goosehead Insurance, Inc. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Goosehead Insurance, Inc. receives a Avoid rating with a composite score of 35.7/100 (rank #4033 of 7,333). Our quantitative framework assigns a Narrow Moat (55/100, trend: stable), Medium uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 33/100.

Our analysis does not support a constructive view on Goosehead Insurance, Inc. at this time. The combination of the current quantitative profile, medium uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.