Trupanion (TRUP): Buy, Sell, or Hold Post Q4 Earnings?

Shareholders of Trupanion would probably like to forget the past six months even happened. The stock dropped 33.7% and now trades at $28.77. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.

Is now the time to buy Trupanion, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Is Trupanion Not Exciting?

Even though the stock has become cheaper, we're swiping left on Trupanion for now. Here are two reasons there are better opportunities than TRUP and a stock we'd rather own.

1. Substandard BVPS Growth Indicates Limited Asset Expansion

We consider book value per share (BVPS) a critical metric for insurance companies. BVPS represents the total net worth per share, providing insight into a company’s financial strength and ability to meet policyholder obligations.

To the detriment of investors, Trupanion’s BVPS grew at a mediocre 10.4% annual clip over the last two years.

2. Previous Growth Initiatives Have Lost Money

Return on equity (ROE) serves as a comprehensive measure of an insurer's performance, showing how efficiently it converts shareholder capital into profits. Strong ROE performance typically translates to better returns for investors through a combination of earnings retention, share repurchases, and dividend distributions.

Over the last five years, Trupanion has averaged an ROE of negative 7.5%, a bad result not only in absolute terms but also relative to the majority of insurers putting up 20%+. It also shows that Trupanion has little to no competitive moat.

Final Judgment

Trupanion isn’t a terrible business, but it doesn’t pass our bar. After the recent drawdown, the stock trades at 2.8× forward P/B (or $28.77 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're fairly confident there are better investments elsewhere. We’d suggest looking at our favorite semiconductor picks and shovels play.

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