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Here's Why You Should Stay Invested in Trupanion (TRUP) Stock
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Trupanion Inc. (TRUP - Free Report) is set to benefit from its focus on pet health and well-being in an underpenetrated pet insurance market, product launches, extended operating boundaries and a solid capital position. These, along with solid growth projections, make the stock worth retaining.
Shares of this Zacks Rank #3 (Hold) pert insurer have gained 5% in the past three months compared with the industry’s increase of 11.4%.
The Zacks Consensus Estimate has moved up 2 cents in the last 60 days.
Image Source: Zacks Investment Research
Optimistic Growth Projection
The Zacks Consensus Estimate for 2024 earnings indicates an improvement of 57.4% on 13.7% higher revenues. The consensus estimate for 2025 earnings suggests an appreciation of 95.4% on 6.5% higher revenues. The expected long-term earnings growth rate is pegged at 39.3%, better than the industry average of 17.1%. It has a Growth Score of A.
Banking on operational expertise, the insurer delivered earnings surprise in the last four quarters.
TRUP projects revenues in the range of $1.2-$1.3 billion, up 14% from the 2023 level. Subscription revenues are projected between $842 million and $862 million, up 20% from 2023. Total adjusted operating income is expected in the range of $100-$120 million, up 32% year over year.
Over the long term, TRUP remains focused on growing adjusted operating income and deploying increasing amounts at high internal rates of return. The pet insurer’s five-year plan includes a 15% adjusted operating margin.
Growth Drivers
TRUP, a provider of insurance for cats and dogs in in the United States, Canada, Continental Europe, and Australia, operates in a large but underpenetrated market. Management noted that less than 5% of the pets are insured in North America and a deficient number across most of Europe. With the change in the attitude of pet owners, who are increasingly focusing on pet health and well-being, TRUP stands a strong chance to capitalize on the growth in a total addressable market worth $34.1 billion. The insurer envisions doubling its addressable market (defined by the number of veterinary hospitals) by the end of 2030.
Average monthly retention continues to remain strong, ensuring uninterrupted revenue generation. An increase in total enrolled subscription pets adds to the upside. The cost of veterinary care continues to rise, outpacing consumer discretionary income, as noted by the management. The role of pricing thus plays an important part, both in keeping the growth pace alive and to comfort the pet parents.
The insurer has also been expanding globally as part of its five-year growth plan, apart from strengthening its compelling portfolio. TRUP noticed increasing contributions from European endeavors, which added about 14,400 new pets during 2023.
To ramp up growth, it is introducing new products. Its portfolio of products comprising Chewy and Aflac, medium and low average monthly revenue per unit (ARPu) products Firkin and Phi Direct and products in continental Europe contributed 22% growth to gross new pet adds in the first quarter of 2024.
Banking on operational strength, it has built a capital position that supports investment in new product development and international expansion. Trupanion expects these investments to extend moat and expand the addressable market in the long run.
Risks
Despite the upside potential, there are a few factors that investors should keep an eye on.
Though insurers’ revenues are increasing and costs are declining, they are not sufficient to cover expenses — compelling the company to incur loss.
Also, the leverage compares unfavorably with the industry average.
TRUP’s trailing 12-month ROE of -9.3% is worse when compared with the industry average of 16.7%, reflecting TRUP’s inefficiency in using shareholders' funds. Also, the return on invested capital in the trailing 12 months was -3.3%, compared unfavorably with the industry average of 7.9%, reflecting the insurer’s inefficiency in utilizing funds to generate income.
HCI Group’s earnings surpassed estimates in each of the last four quarters, the average beat being 139.15%. Year to date, shares of HCI have gained 6.1%. The Zacks Consensus Estimate for HCI’s 2024 and 2025 earnings suggests 57.6% and 4.3% year-over-year growth, respectively.
Palomar’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 15.10%. Year to date, PLMR’s stock has surged 48.5%. The Zacks Consensus Estimate for PLMR’s 2024 and 2025 earnings indicates 26% and 18.1% year-over-year growth, respectively.
ProAssurance earnings surpassed estimates in two of the last four quarters and missed in the other two. Year to date, PRA’s stock has lost 11.8%. The Zacks Consensus Estimate for PRA’s 2024 and 2025 earnings calls for 371.4% and 72.6% year-over-year growth, respectively.
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Here's Why You Should Stay Invested in Trupanion (TRUP) Stock
Trupanion Inc. (TRUP - Free Report) is set to benefit from its focus on pet health and well-being in an underpenetrated pet insurance market, product launches, extended operating boundaries and a solid capital position. These, along with solid growth projections, make the stock worth retaining.
Shares of this Zacks Rank #3 (Hold) pert insurer have gained 5% in the past three months compared with the industry’s increase of 11.4%.
The Zacks Consensus Estimate has moved up 2 cents in the last 60 days.
Image Source: Zacks Investment Research
Optimistic Growth Projection
The Zacks Consensus Estimate for 2024 earnings indicates an improvement of 57.4% on 13.7% higher revenues. The consensus estimate for 2025 earnings suggests an appreciation of 95.4% on 6.5% higher revenues. The expected long-term earnings growth rate is pegged at 39.3%, better than the industry average of 17.1%. It has a Growth Score of A.
Banking on operational expertise, the insurer delivered earnings surprise in the last four quarters.
TRUP projects revenues in the range of $1.2-$1.3 billion, up 14% from the 2023 level. Subscription revenues are projected between $842 million and $862 million, up 20% from 2023. Total adjusted operating income is expected in the range of $100-$120 million, up 32% year over year.
Over the long term, TRUP remains focused on growing adjusted operating income and deploying increasing amounts at high internal rates of return. The pet insurer’s five-year plan includes a 15% adjusted operating margin.
Growth Drivers
TRUP, a provider of insurance for cats and dogs in in the United States, Canada, Continental Europe, and Australia, operates in a large but underpenetrated market. Management noted that less than 5% of the pets are insured in North America and a deficient number across most of Europe. With the change in the attitude of pet owners, who are increasingly focusing on pet health and well-being, TRUP stands a strong chance to capitalize on the growth in a total addressable market worth $34.1 billion. The insurer envisions doubling its addressable market (defined by the number of veterinary hospitals) by the end of 2030.
Average monthly retention continues to remain strong, ensuring uninterrupted revenue generation. An increase in total enrolled subscription pets adds to the upside. The cost of veterinary care continues to rise, outpacing consumer discretionary income, as noted by the management. The role of pricing thus plays an important part, both in keeping the growth pace alive and to comfort the pet parents.
The insurer has also been expanding globally as part of its five-year growth plan, apart from strengthening its compelling portfolio. TRUP noticed increasing contributions from European endeavors, which added about 14,400 new pets during 2023.
To ramp up growth, it is introducing new products. Its portfolio of products comprising Chewy and Aflac, medium and low average monthly revenue per unit (ARPu) products Firkin and Phi Direct and products in continental Europe contributed 22% growth to gross new pet adds in the first quarter of 2024.
Banking on operational strength, it has built a capital position that supports investment in new product development and international expansion. Trupanion expects these investments to extend moat and expand the addressable market in the long run.
Risks
Despite the upside potential, there are a few factors that investors should keep an eye on.
Though insurers’ revenues are increasing and costs are declining, they are not sufficient to cover expenses — compelling the company to incur loss.
Also, the leverage compares unfavorably with the industry average.
TRUP’s trailing 12-month ROE of -9.3% is worse when compared with the industry average of 16.7%, reflecting TRUP’s inefficiency in using shareholders' funds. Also, the return on invested capital in the trailing 12 months was -3.3%, compared unfavorably with the industry average of 7.9%, reflecting the insurer’s inefficiency in utilizing funds to generate income.
Stocks to Consider
Some top-ranked stocks from the insurance industry are HCI Group, Inc. (HCI - Free Report) , Palomar Holdings (PLMR - Free Report) and ProAssurance (PRA - Free Report) . Each stock presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
HCI Group’s earnings surpassed estimates in each of the last four quarters, the average beat being 139.15%. Year to date, shares of HCI have gained 6.1%. The Zacks Consensus Estimate for HCI’s 2024 and 2025 earnings suggests 57.6% and 4.3% year-over-year growth, respectively.
Palomar’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 15.10%. Year to date, PLMR’s stock has surged 48.5%. The Zacks Consensus Estimate for PLMR’s 2024 and 2025 earnings indicates 26% and 18.1% year-over-year growth, respectively.
ProAssurance earnings surpassed estimates in two of the last four quarters and missed in the other two. Year to date, PRA’s stock has lost 11.8%. The Zacks Consensus Estimate for PRA’s 2024 and 2025 earnings calls for 371.4% and 72.6% year-over-year growth, respectively.