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Trupanion's Q1 2018: Better Than Before But Still Too Expensive

May 02, 2018 11:30 PM ETTrupanion, Inc. (TRUP)1 Comment


  • On first of May, Trupanion reported its results for the first quarter of 2018.
  • The company showed a positive trend on revenues, which grew by more than 27%.
  • However, the company remains unprofitable on the underwriting side, if I am confident on the margin improvement at the end of 2018.
  • Nevertheless, I will not invest in Trupanion at the current price, considering that the market euphoria is too high.

Executive Summary

Trupanion (NASDAQ:TRUP) is an insurance company providing insurance coverage for pets. On 1st of May, Trupanion published its results for the first quarter of 2018. As expected, Trupanion showed double-digit growth in its revenues; however, on the underwriting side, the company remained unprofitable. Nevertheless, the market appreciated the results and the stock price grew by more than 4% after the market close. From a personal opinion, I do not understand the market euphoria even if I have seen a positive trend and expect a positive underwriting result for 2018.

Increase In Revenues Is Not Equal To Profit Growth

Increasing the revenues does not mean growing its profit for a company.

For an insurer, this statement is even more exact, because it pays claims and the claims amount could be higher than the premiums it received.

In Q1 2018, Trupanion reported total revenues of $69.8 million or a 27% growth on a year-over-year basis.

Source: Trupanion’s Q1 Report

The company exceeded the high end of its guidance for the quarter, largely due to better-than-expected enrolled pet growth in the other business segment. For Q2 2018, Trupanion’s management expects quarterly revenue in the range of $72 million to $73 million, representing 24% year-over-year growth at the midpoint.

Regarding the commercial development, I cannot deny the fact that Trupanion is expanding rapidly and is succeeding to maintain a double-digit growth over the years. My problem is Trupanion is an insurance company, a pet insurer. It receives money to cover pet health costs. If the operational costs are higher than the overall premium amounts, then Trupanion loses money on the underwriting side. Unfortunately, it was still the case in Q1 2018. With a combined ratio of 102.1%, the company lost $2 per $100 the company received from its policyholders.

All Is Not

This article was written by

The CrickAnt profile picture
Leader of Cash Flow Club
The Investment Community where your "Cash Flow is King"
Considering myself as Finance enthusiast, I'm investing on stocks since more than 3 years by using a value approach and by following famous Warren Buffett's piece of advice: "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

I am currently contributing articles to Darren McCammon's service Cash Flow Kingdom, "The place where Cash Flow is King".

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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