Trupanion is a pet insurance company whose stock price has plummeted by approximately 86% since its peak in December of 2021. Despite increasing revenue by 24 percent last quarter, top-line growth has been slowing for seven quarters in a row, which raises questions about the company’s profitability. Analysts see the potential of Trupanion as demand for pet products is expected to continue strong. Recent rate increases and cost cutting measures may also improve the financial performance of the company.
Key Points
1. Trupanion’s stock currently trades at a price that is significantly lower than its December 2021 high, making it an appealing investment for investors looking for a bargain.
2. The company is experiencing success in increasing its revenue. However, it has also seen a slowdown of top-line expansion for seven consecutive quarterly periods.
3. Investors must be convinced that the company’s profit margins can increase in the future and that moderate sales growth will lead to profitability.
Trupanion’s stock price has fallen significantly since December 2021, when it peaked. The current value of the stock is 86% less than that peak. Although the company was able to grow its revenue by 24% last quarter, the growth rate has been declining for seven consecutive quarters.
Investors will only believe in Trupanion if they have faith that moderate sales growth will lead to profitability. Stocks of the company could rebound if they can increase profit margins in the coming years.
Despite Trupanion’s struggles, investors should consider five other stocks. Trupanion has been struggling for some time. reported A net loss twice as large as what Wall Street had expected led to a drop in the May post-earnings. The company is facing difficulties due to the rising costs of the pet industry. This includes higher prices for food, supplies, grooming and boarding. The veterinary inflation in the first three months of this year was 15% higher than Trupanion had predicted. The company suffered a loss in the amount of $24.8M, almost triple that of the previous year.
Darryl Rawlings – the CEO and founder of Trupanion – believes that high vet bills can actually have a beneficial impact on a company. Trupanion saw a 24% increase in revenue last quarter as pet owners sought medical coverage for their animals. Nevertheless, the growth rate is decreasing and has been so for seven consecutive quarterly. Trupanion stock is trading at a significant discount to its peak in December 2021, which looks like a knife falling.
Trupanion is still optimistic about its potential for a turnaround despite these challenges. Analysts and hedge fund managers have expressed a more positive outlook on the company as demand for pet products is expected to continue to grow in the future due to the increased adoption of pets. Trupanion’s growth is predicted to slow down, with revenue estimates for the following three quarters 2023 predicting growth rates between 20%, 15% and 13%. Investors will need to see Trupanion make significant efforts to reduce costs in order to justify its equity risk premium.
Trupanion has over 1.6 millions pets enrolled, of which more than half are subscribers. However, this number is yet to translate into profit. Although positive earnings per shares may be two or three years off, improvement is on the horizon. According to consensus estimates, Trupanion will have a significant reduction in its net loss next year. Insurance rate hikes may help the company reach profitability. Rate increases approved in California and New York – two of Trupanion’s largest markets – are expected to positively impact pricing. Efficiencies in cost cutting and operational efficiency can also contribute to possible financial improvements.
Trupanion, despite being undervalued and commanding a higher valuation than other small-cap insurance companies in terms of price-to book ratio, still has promise. Trupanion’s strong position in the under-penetrated pet insurance sector positions it well for future growth. In North America, only 3% have pet insurance. This is a far cry from countries such as Sweden or the U.K.
Trupanion has the potential to grow significantly, say analysts at Gilder Gagnon Howe or Jeffries. Jeffries maintains an “buy” Rating on the stock with a $51 target price, which implies over 100% growth within the next year. Gilder Gagnon Howe is a hedge-fund that has increased its stake in Trupanion to around 7%.
Trupanion has suffered a major blow to its stock, but there are signs of optimism about the potential for a recovery. Investors need to have faith that the company will achieve profitability through moderate growth in sales. Trupanion stock may start to recover if the company can increase profit margins over the next few years. Trupanion is well positioned for growth in the long term despite the challenges facing the pet industry.
