As veterinary care costs rise, the need for high-quality and dependable pet insurance solutions becomes more acute. Trupanion (NASDAQ:TRUP), a prominent pet insurance provider, is well positioned to build ongoing momentum in this expanding market.
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The company operates within a growing market. Its spending on 180 million dogs and cats in North America surpasses $62 billion annually, though less than 5% of pets are insured. The stock has recently experienced a 20% surge in price. Despite this impressive performance, it still has growth potential and trades at a relative discount, making it an intriguing option for value investors.
Trupanion Leads in a Growing Market
Trupanion 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.
The company serves a wide swath of regions, including the United States, Canada, Europe, Puerto Rico, and Australia, with over 990,000 pets insured. Its patented process allows direct payment to veterinarians at checkout, a feature unique to the North American market.
Its insurance policies are issued through its wholly-owned entities, American Pet Insurance Company in the United States and Omega General Insurance Company in Canada, while Trupanion Australia is a partnership with Hollard Insurance Company.
Trupanion’s Recent Financial Results
Trupanion recently reported its financial results for Q1 2024. The company recorded a significant increase in revenue, bringing in $306.1 million, exceeding consensus expectations of $300.51 million and marking a 19% year-over-year increase. The company’s GAAP EPS of -$0.16 also beat expectations by $0.04.
Subscription business revenue was notably strong, with earnings of $201.1 million, 22% higher than the first quarter of 2023. The number of pets enrolled in their subscription service grew to 1,006,168, an 11% increase year-over-year.
As of quarter end, the company reported $275.2 million in cash and short-term investments, with an additional $15 million accessible under a credit facility. By the end of the quarter, a $256.7 million capital surplus was maintained at insurance subsidiaries, which was $103.4 million above the risk-based capital requirement of $153.3 million. This was a decline from year-end requirements due to slowing growth in other business sectors and a decrease in the business’s capital intensity.
What Is the Price Target for TRUP Stock?
Analysts following the company have been cautiously optimistic about the stock. For example, BofA analyst Joshua Shanker, a five-star analyst according to Tipranks’ rating, recently upgraded the shares from Neutral to Buy, raising the price target from $35 to $49. He noted a “material increase” in the cash flow model based on a return to normalized profitability.
Trupanion is rated a Moderate Buy based on five analysts’ recommendations and price targets over the past three months. The average price target for TRUP stock is $35.40, representing an upside of 22.28% from current levels.
The stock has been highly volatile but has been trending upward recently, climbing over 36% in the past year. It sits in the middle of its 52-week price range of $18.45-$36.66 and continues to show positive price momentum, trading above its 20-day (27.58) and 50-day (26.53) moving averages. Shares trade at a relative discount with a P/S ratio of 1.04x, below the Specialty Insurance industry average of 1.5x.
Key Takeaway for TRUP
Trupanion is well positioned to lead the flourishing pet insurance industry. The insurance provider is making robust strides, with recent beats for top and bottom-line financial performance. The stock trades at a discount, making it a compelling prospect for value investors.
