Trupanion (NASDAQ: TRUP) was founded in 1999 by current CEO Darryl Rawlings, 15 years after coming up with the idea following the death of his dog. Rawlings’ goal was to “create a company that was valuable to pet owners, their pets, and veterinarians,” and that company is now Trupanion. But are there enough people willing to insure their pooches and feline friends to make Trupanion a compelling investment?
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The bull case for Trupanion
Trupanion estimates that its total addressable market is $32.7 billion and the number of pets with insurance in the U.S. and Canada is under-penetrated at roughly 1% and 2% respectively. Comparing this to 40% in Sweden, there is a large runway for growth, with the number of pets enrolled by Trupanion currently standing at 804,251. According to a report by the North American Pet Health Insurance Association, since 2015, the annual growth rate of insured pets has been 15.8%, demonstrating the ever-growing market.
Trupanion has reported revenue growth of above 20% for over ten years. In the most recent quarter, Q3, Trupanion increased revenue by 31% YoY to $130.1 million. This growth was driven by a 15% increase in enrolled pets and a 20% increase in subscription revenue. It also boasts an impressive monthly retention rate of 98.6%. Trupanion continues to invest internally with 45% internal return in the last quarter, and management expects these high rates of return to continue.
Trupanion has partnered with over 2,300 veterinary hospitals and over 10,000 veterinarians, which is vital as this helps to increase referrals. Trupanion also has software in many veterinary clinics which allows for claims to be paid in minutes and minimizes friction, differing from traditional insurance companies where claims would be reimbursed at a later date. In clinics where there is software installed veterinarians may be more inclined to push the product and recommend it. Increased referrals, coupled with growing average revenue per-user, will help to fuel growth in the coming years.
The bear case for Trupanion
Larger insurance companies could be considered the greatest threat to Trupanion, and if the pet insurance market continues to expand, it’s likely more of the larger players will enter the space. However, Trupanion has managed to navigate this threat thus far and is the market leader in the space with a sole focus on pet insurance. One could argue that its brand name and integration with veterinary hospitals differentiate itself from competitors, and acts as a competitive advantage.
Another risk that investors must take into account is whether or not the penetration rates in the U.S. will reach the levels of other markets. The worst-case scenario is that the penetration rates will stagnate or decline. If the opposite occurs, we could be looking at a company with room to grow many times over. However, it reported a net loss of $2.6 million compared to a net income of $0.8 million a year prior. The ability to consistently produce a profit remains a question mark that investors should keep an eye on but must take into account that it continues to invest heavily.
So, should I be watching Trupanion stock?
Investors need to weigh up the potential for growth with the risk that insurance penetration in the U.S. and Canada may not reach the same level as other countries. This company does appear to have many of the attributes that we look for, such as a founding CEO and significant market opportunity, among others. Trupanion could be a great addition to a diversified portfolio and could provide outstanding returns if it continues to grow at the pace that management is targeting.
When did Trupanion IPO?
Trupanion went public in 2014.
What is its market cap?
Its market cap is approximately $3 billion
Does Trupanion pay dividends?
Trupanion doesn’t pay dividends and is unlikely to in the future.
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More China-invested overseas coal-fired power capacity was cancelled than commissioned since 2017, research showed on Wednesday, highlighting the obstacles facing the industry as countries work to reduce carbon emissions.
The Centre for Research on Energy and Clean Air (CREA) said that the amount of capacity shelved or cancelled since 2017 was 4.5 times higher than the amount that went into construction over the period.
Coal-fired power is one of the biggest sources of climate-warming carbon dioxide emissions, and the wave of cancellations also reflects rising concerns about the sector’s long-term economic competitiveness.
Since 2016, the top 10 banks involved in global coal financing were all Chinese, and around 12% of all coal plants operating outside of China can be linked to Chinese banks, utilities, equipment manufacturers and construction firms, CREA said.
But although 80 gigawatts of China-backed capacity is still in the pipeline, many of the projects could face further setbacks as public opposition rises and financing becomes more difficult, it added.
China is currently drawing up policies that it says will allow it to bring greenhouse gas emissions to a peak by 2030 and to become carbon-neutral by 2060.
But it was responsible for more than half the world’s coal-fired power generation last year, and it will not start to cut coal consumption until 2026, President Xi Jinping said in April.
Environmental groups have called on China to stop financing coal-fired power entirely and to use the funds to invest in cleaner forms of energy, and there are already signs that it is cutting back on coal investments both at home and abroad.
Following rule changes implemented by the central bank earlier this year, “clean coal” is no longer eligible for green financing.
Industrial and Commercial Bank of China, the world’s biggest bank by assets and a major source of global coal financing, is also drawing up a “road map” to pull out of the sector, its chief economist Zhou Yueqiu said at the end of May.
(Reporting by David Stanway; Editing by Kenneth Maxwell)
Bank of Montreal CEO sees growth in U.S. share of earnings
Bank of Montreal expects its earnings contribution from the U.S. to keep growing, even without any mergers and acquisitions, driven by a much smaller market share than at home and nearly C$1 trillion ($823.38 billion) of assets, Chief Executive Officer Darryl White said on Monday.
“We do think we have plenty of scale,” and the ability to compete with both banks of similar as well as smaller size, White said at a Morgan Stanley conference, adding that the bank’s U.S. market share is between 1% and 5% based on the business line, versus 10% to 35% in Canada. “And we do it off the scale of our global balance sheet of C$950 billion.”
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(Reporting by Nichola Saminather; Editing by Leslie Adler)
GameStop falls 27% on potential share sale
Shares of GameStop Corp lost more than a quarter of their value on Thursday and other so-called meme stocks also declined in a sell-off that hit a broad range of names favored by retail investors.
The video game retailer’s shares closed down 27.16% at $220.39, their biggest one-day percentage loss in 11 weeks. The drop came a day after GameStop said in a quarterly report that it may sell up to 5 million new shares, sparking concerns of potential dilution for existing shareholders.
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Soaring rallies in the shares of GameStop and AMC Entertainment Holdings over the past month have helped reinvigorate the meme stock frenzy that began earlier this year and fueled big moves in a fresh crop of names popular with investors on forums such as Reddit’s WallStreetBets.
Many of those names traded lower on Thursday, with shares of Clover Health Investments Corp down 15.2%, burger chain Wendy’s falling 3.1% and prison operator Geo Group Inc, one of the more recently minted meme stocks, down nearly 20% after surging more than 38% on Wednesday. AMC shares were off more than 13%.
Worries that other companies could leverage recent stock price gains by announcing share sales may be rippling out to the broader meme stock universe, said Jack Ablin, chief investment officer at Cresset Capital.
AMC last week took advantage of a 400% surge in its share price since mid-May to announce a pair of stock offerings.
“It appears that other companies, like GameStop, are hoping to follow AMC’s lead by issuing shares and otherwise profit from the meme stocks run-up,” Ablin said. “Investors are taking a dim view of that strategy.”
Wedbush Securities on Thursday raised its price target on GameStop to $50, from $39. GameStop will likely sell all 5 million new shares but that amount only represents a “modest” dilution of 7%, Wedbush analysts wrote.
GameStop on Wednesday reported stronger-than-expected earnings, and named the former head of Amazon.com Inc’s Australian business as its chief executive officer.
GameStop’s shares rallied more than 1,600% in January when a surge of buying forced bearish investors to unwind their bets in a phenomenon known as a short squeeze.
The company on Wednesday said the U.S. Securities and Exchange Commission had requested documents and information related to an investigation into that trading.
In the past two weeks, the so-called “meme stocks” have received $1.27 billion of retail inflows, Vanda Research said on Wednesday, matching their January peak.
(Reporting by Aaron Saldanha and Sagarika Jaisinghani in Bengaluru and Sinead Carew in New York; Additional reporting by Ira Iosebashvili; Editing by Sriraj Kalluvila, Shounak Dasgupta, Jonathan Oatis and Nick Zieminski)
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