Trupanion, Inc. (TRUP) is a provider of specialty insurance products that primarily generates revenue through the sale of pet insurance, especially for cats and dogs. The company’s medical plan covers most veterinary costs for accident and illness claims with no payout limitations.

With their unique direct payment system and round-the-clock pre-approval services, Trupanion makes it easier for pet owners to manage costs and care for their furry friends. While they don’t offer wellness plans, their additional coverage options, like recovery care and pet owner assistance, provide flexible choices for pet lovers.

As the company prepares to release its second-quarter earnings report on August 8, 2024, analysts expect a 14.3% year-over-year revenue increase to $309.34 million. On the contrary, TRUP’s loss per share is forecasted to sit at $0.18. Trupanion has consistently exceeded revenue and EPS estimates in each of the trailing four quarters, including the first quarter.

In the first quarter of 2024, the company recorded $306.12 million in revenue, exceeding consensus expectations of $300.52 million and marking a 19% year-over-year increase. The company’s EPS of negative $0.16 also beat expectations by $0.04.

Shares of TRUP have gained 64.8% in the past nine months and 21.1% over the past month to close the last trading session at $34.38.

Let’s look at factors that could influence TRUP’s performance in the upcoming months.

Recent Development

On June 12, the company announced a strategic collaboration with Boehringer Ingelheim to provide pets and their families with increased access to high-quality healthcare and enhanced disease treatment and protection.

The collaboration focuses on early detection of risk factors for common pet conditions, continuous veterinarian and consumer education, product extensions, promotions, and peer-reviewed publications.

Strong Financial Performance

For the fiscal first quarter that ended March 31, 2024, TRUP’s revenues increased 19.4% year-over-year to $306.12 million. The total number of enrolled pets (including those from other business segments) for the quarter was 1,708,017, reflecting a 6% uptick from the previous year. Also, its subscription-enrolled pets grew by 11% year-over-year to 1,006,168.

The company’s non-GAAP operating income rose 37.2% from the year-ago value to $21.31 million, while its adjusted EBITDA stood at $4.84 million versus an adjusted EBITDA loss of $4.87 million. In addition, its cash inflow from operating activities amounted to $2.43 million compared to an outflow of $6.86 million in the year-ago quarter.

Mixed Analyst Expectations

Analysts expect TRUP’s revenue for the third quarter (ending September 2024) to increase 11.3% year-over-year to $318.26 million. However, the company is expected to post a loss per share of $0.06 in the ongoing quarter.

Similarly, for the fiscal year ending December 2024, TRUP’s revenue is expected to grow 13.7% from the prior year to $1.26 billion and increase by 8.1% year-over-year in 2025.  On the other hand, the company’s EPS is forecasted to remain negative at $0.39 for 2024 and $0.05 for 2025.

Dimmed Profitability

TRUP’s trailing-12-month gross profit margin of 18.59% is 69.1% lower than the industry average of 60.07%. Similarly, the stock’s trailing-12-month levered FCF margin of 0.23% is 98.7% lower than the industry average of 17.60%.

Additionally, TRUP’s trailing-12-month ROCE and ROTA of negative 8.95% and negative 3.39% unfavorably compare to their respective industry averages of 10.57% and 1.06%. Also, the stock’s net income margin is negative at 2.31% compared to the 22.93% industry average.

Mixed Valuation

In terms of forward EV/Sales, TRUP is trading at 1.13x, which is 64.4% lower than the industry average of 3.18x. Likewise, the stock’s forward Price/Sales multiple of 1.15 is 60.2% below the industry average of 2.88.  

However, TRUP’s forward EV/EBITDA of 43.19x is 330.1% higher than the industry average of 10.04x. Also, its forward Price/Book ratio of 4.66x compares with the industry average of 1.22x.

POWR Ratings Exhibit Mixed Prospects

TRUP’s stance is apparent in its POWR Ratings. The stock has an overall rating of C, which translates to Neutral in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. TRUP is trading above its 50-day moving average of $29.69 and the 200-day moving average of $27.37, justifying its A grade for Momentum.

Yet, the stock received a C for Sentiment, corresponding with its mixed analysts’ estimates. Also, with a 24-month beta of 2.34, the stock has earned a grade of D for Stability.

TRUP is ranked #41 out of 63 stocks in the Medical – Services industry. Click here to access TRUP’s Growth, Value, and Quality ratings.

Bottom Line

The pet insurance market is booming, with North Americans spending over $62 billion annually on their furry friends. Yet, only a tiny fraction (less than 5%) of these pets are insured, leaving a huge growth opportunity for companies like Trupanion. By 2033, the global pet insurance market is estimated to reach $38.3 billion, growing at a CAGR of 14.5% from 2024 to 2033.

As we anticipate TRUP’s second-quarter results, analysts foresee its earnings per share to remain negative throughout the fiscal years 2024 and 2025, alongside solid revenue growth. Given TRUP’s mixed valuation, weak profitability metrics, and heightened volatility, it could be wise to wait for a better entry point in this stock now.

How Does Trupanion, Inc. (TRUP) Stack Up Against Its Peers?

While TRUP has an overall grade of C, equating to a Neutral rating, you may check out these A (Strong Buy) rated stocks within the Medical – Services industry: Fresenius Medical Care AG (FMS), National HealthCare Corporation (NHC), and McKesson Corporation (MCK). To explore more Medical – Services, click here.

What To Do Next?

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TRUP shares were trading at $35.61 per share on Friday afternoon, up $1.23 (+3.58%). Year-to-date, TRUP has gained 16.72%, versus a 15.84% rise in the benchmark S&P 500 index during the same period.

About the Author: Shweta Kumari

Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions. More...

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