Finbold·2025-12-17 11:35Core Insights - Investor focus is shifting towards high-growth companies with clear operational inflection points for 2026, rather than broad momentum [1] - Two stocks identified with improving fundamentals and potential for significant growth are Root and dLocal [1] Group 1: Root (NASDAQ: ROOT) - Root has restructured its business around usage-based insurance, telematics, and AI-driven pricing, leading to improved risk selection and pricing accuracy [2] - The company has shown narrowing loss ratios and improving underwriting margins, indicating progress towards sustainable profitability [3] - In Q3 2025, Root reported revenue of $387.8 million, a 26.9% year-over-year increase, driven by a new pricing algorithm and expanded distribution, despite a net loss of $5.4 million [4] - Key catalysts for 2026 include sustained profitability, geographic expansion, partnerships, and product rollouts, although risks from claims volatility and competition exist [4] Group 2: dLocal (NASDAQ: DLO) - dLocal reported total payment volume of $10.4 billion in Q3 2025, a 59% year-over-year increase, with strong momentum expected to continue [8] - The company has shown expanding gross margins and improving adjusted EBITDA, indicating that growth is becoming more profitable [9] - Structural tailwinds from digital payments and e-commerce adoption in emerging markets support dLocal's outlook [9] - Key growth drivers include an expanding merchant base, geographic diversification, and improved product mix, with catalysts such as accelerating volumes and higher take rates expected [10] Group 3: Investment Outlook - Both Root and dLocal's potential for significant upside is contingent on sustained underwriting profitability and faster policy growth, which could lead to a small-cap re-rating [12] - While a tenfold return in a single year is ambitious, the fundamentals and catalysts for both stocks suggest a plausible path for substantial growth in 2026 [12]