Here's Why You Should Consider Investing in Trupanion (TRUP)
Trupanion Inc.’s TRUP heightened focus on pet health and well-being in an underpenetrated pet insurance market, product launches, extended operating boundaries, a solid capital position and growth prospects make it worth adding to one’s portfolio.
This Zacks Rank #2 (Buy) pet insurer has a decent earnings surprise history. It delivered positive surprises in two of the last four reported quarters while missed in the other two.
Growth Projections
The Zacks Consensus Estimate for 2024 earnings indicates an improvement of 63% from the year-ago reported figure on 10.9% higher revenues.
Optimistic Outlook
TRUP projects revenues in the range of $1.73 billion to $1.89 billion, up 19% from the 2022 level. Subscription revenues are projected between $708 million and $718 million, up 20% from 2022. Total adjusted operating income is now expected to be in the range of $70 million to $80 million.
The insurer estimates subscription revenues in the range of $180 million to $182 million while total adjusted operating income is anticipated in the range of $18 million to $21 million.
Business Tailwinds
This provider of insurance for cats and dogs operates in a large but underpenetrated market. With a change in the attitude of pet owners, who are increasingly focusing on pet health and well-being, TRUP is poised well for 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.
The average pet now stays with Trupanion for about 74 months, ensuring uninterrupted revenue generation as well as higher retention rates. The insurer has also been expanding globally, apart from strengthening its compelling portfolio. TRUP noticed increasing contribution from European endeavors, adding about 4,000 new pets during the second quarter of 2023. It also witnessed high demand in Continental Europe. The insurer intends to foray into Poland, adding 8,000 hospitals to the addressable market, which totals over 50,000.
A strategic investment by Aflac bodes well. TRUP stated that Aflac-integrated Trupanion employee benefits products would be available to select Aflac brokers to sell to work sites across North America. In the past three months, the stock has lost 2.2% against the industry’s growth of 6.9%.
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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.
A solid balance sheet 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.
Trupanion boasts being the only company in the S&P 600 to deliver revenue growth in excess of 20% per year for every year over the past decade.
Other Stocks to Consider
Some other top-ranked stocks from the insurance industry are AMERISAFE. AMSF, Aflac Incorporated AFL and Employers Holdings EIG, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AMERISAFE delivered a trailing four-quarter average earnings surprise of 21.66%. In the past year, AMSF has gained 11.3%.
The Zacks Consensus Estimate for AMSF’s 2023 and 2024 earnings has moved 1 cent and 3 cents north, respectively in the past 60 days.
Aflac earnings surpassed estimates in each of the last four quarters, the average being 7.76%. In the past year, AFL has gained 32.7%.
The Zacks Consensus Estimate for AFL’s 2023 and 2024 earnings implies a year-over-year rise of 12.7% and 3%, respectively. The expected long-term earnings growth is currently pegged at 5.5%.
Employers Holdings' earnings surpassed estimates in each of the last four quarters, the average being 34.08%. In the past year, EIG has gained 23%.
The Zacks Consensus Estimate for EIG’s 2023 and 2024 earnings implies a year-over-year rise of 17.6% and 2.9%, respectively.
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