Please ensure Javascript is enabled for purposes of website accessibility

Is Trupanion Still a Buy After the Rally in June?

By Kody Kester - Updated Jul 12, 2021 at 11:13AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company doubled down on its commitment to growth targets with its creation of an International Business EVP position.

The announcement last month that pet insurance company Trupanion (TRUP 4.66%) was appointing 30-year animal health industry veteran Simon Wheeler as its first executive vice president of international business sent the stock up 28% in June, comfortably outpacing the S&P 500's pedestrian 2%.

A trifecta of tailwinds

Wheeler's three decades of industry experience should be a huge boon to Trupanion as it looks to double its addressable market of veterinary hospitals by 2035, so it is understandable that the market cheered. As EVP of international business, Wheeler will be responsible for expanding Trupanion's presence in Australia, as well as launching operations in Japan, the UK, Brazil, and Western Europe — adding millions of pets to Trupanion's addressable market.

Management's announcement last October that the company was forming a distribution alliance with Aflac (AFL 0.44%) in the U.S. also brings the potential for the same to occur in Japan, where Aflac's policies cover a quarter of households with its cancer and medical insurance offerings.

Citing a shift in nomenclature "from pet owners to pet parents, which indicates that pets are considered ... a part of [the] family these days," researchers at Global Market Insights forecast that the worldwide pet insurance market will compound at 7.7% annually, taking industry revenues from $6.9 billion in 2020 to $11.6 billion by 2027.

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

Trupanion remains a reasonable buy for patient investors

Wheeler will assume his new position this October, which will represent the beginning of Trupanion's long international growth runway and what will likely be a continuation of robust top-line growth in the years to follow.

Factoring in an expansion in global pet insurance market share from 7% in 2020 to 10% by 2027, Trupanion's revenues would more than double from $500 million to a staggering $1.2 billion over that time period. That's 4 times the current $5 billion market capitalization, suggesting there is reasonable upside from the current share price.

Despite the run-up in the stock last month, Trupanion appears to be worth consideration from investors with a longer time horizon as the global pet insurance megatrend plays out and the company gains market share from its brilliant partnership with Aflac.

Kody Kester owns shares of Aflac. The Motley Fool owns shares of and recommends Trupanion. The Motley Fool recommends Aflac. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Trupanion Stock Quote
Trupanion
TRUP
$68.09 (4.66%) $3.03
Aflac Incorporated Stock Quote
Aflac Incorporated
AFL
$59.43 (0.44%) $0.26

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
377%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.