Is Trupanion still a buy after the June rally?


The announcement last month that the pet insurance company Trupanion (NASDAQ: TRUP) named Simon Wheeler, a 30-year veteran of the animal health industry, as senior executive vice president of international affairs, pushed the stock up 28% in June, comfortably outpacing the 2% pedestrian of the S&P 500 .

A trio of tailwinds

Wheeler’s three decades of experience in the industry should be a huge boon to Trupanion as it seeks to double its addressable veterinary hospital market by 2035, so it’s understandable that the market has cheered. As Executive Vice President of International Affairs, Wheeler will be responsible for expanding Trupanion’s presence in Australia, as well as launching operations in Japan, UK, Brazil and Western Europe, adding millions of pets at the Trupanion Addressable Market.

Management’s announcement last October that the company was forming a distribution alliance with Aflac (NYSE: AFL) in the United States, the same may also be happening in Japan, where Aflac’s policies cover a quarter of households with its cancer and medical insurance offers.

Citing a change in nomenclature “from pet owners to pet parents, indicating that animals are considered … as part of [the] family these days, ”Global Market Insights researchers predict the global pet insurance market to grow 7.7% annually, pushing industry revenue up to $ 6.9 billion in 2020 to $ 11.6 billion by 2027.

Considering that Trupanion’s $ 500 million in net sales in 2020 was good enough for a 7% market share during the year, there is clearly considerable scope for the company to increase its dominance in a market. growing steadily by leveraging Wheeler’s expertise and Aflac’s distribution power.

Trupanion remains a reasonable buy for patient investors

Wheeler will assume his new role in October, which will mark the start of Trupanion’s long track of international growth and what will likely be the continuation of robust top-line growth in the years to come.

Taking into account an expansion of the global pet insurance market share from 7% in 2020 to 10% by 2027, Trupanion’s revenue would more than double from $ 500 million to $ 1.2 billion during this period. This is 4 times the current market cap of $ 5 billion, suggesting that there is a reasonable rise from the current share price.

Despite the stock surge last month, Trupanion appears to be worthy of investor attention with a longer time horizon as the global pet insurance megatrend unfolds and the company gains market share. thanks to its brilliant partnership with Aflac.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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