As a growth investor, few signs are as encouraging to witness from one of your holdings as a rapidly growing customer base. This is because such an occurrence typically means that the revenue of a business is quickly rising, and if the company isn't yet profitable, it is on the way.

After recently reporting results for the second quarter, pet insurer Trupanion (TRUP 3.58%) is definitely expanding its enrolled-pets membership base. But is the stock a buy for growth investors? Let's peek at Trupanion's fundamentals and valuation to answer this question.

Sizzling revenue growth continues

A YouGov survey from a few years back found that 88% of American pet owners view their pets as family members. Taking the results of this survey into consideration, it shouldn't be shocking to learn that North American pet owners alone spend $60 billion-plus and counting each year to provide veterinary care for their animals. Since its founding in 2000, Trupanion has established itself as a leading choice for pet owners to hedge against high veterinary care costs. 

The Seattle, Washington-based company's total revenue surged 23.3% higher over the year-ago period to $270.6 million during Q2 ended June 30. What contributed to Trupanion's 63rd consecutive quarter of 20%-plus annualized revenue growth?

Thanks to its stellar reputation and growing demand for pet insurance, the company's enrolled pets rose by 24.6% year over year to nearly 1.7 million in Q2. This was the primary driver of top-line growth for the quarter. Moving forward, enrolled-pets growth should continue to be the biggest growth catalyst for Trupanion.

The company's free cash flow was negative $8.1 million during Q2. Considering that free cash flow was negative $7.1 million in the year-ago period, this initially seems to be a step back. But due to more efficient pet-acquisition spending, founder and CEO Darryl Rawlings noted that the per-pet acquisition cost fell year over year by 24%. Improved operating efficiency is what led Trupanion's free cash flow to improve $3.9 million sequentially over Q1. Along with more actions to more efficiently spend that should be seen in the months ahead, management expects to be free-cash-flow positive by this year's fourth quarter.

A veterinarian examines a cat.

Image source: Getty Images.

A financially healthy business with robust growth potential

Aside from its focus on keeping cash outflows in check, there are other reasons to be optimistic about Trupanion's future. For one, the company had a net-cash and short-term investments balance of $134.2 million as of Q2. Based on Trupanion's $241 average pet-acquisition cost through the first half of 2023, this could allow the company to boost its base business by almost 600,000 pets.

But the even bigger opportunity for the pet insurer is its partnership with Aflac called Aflac Pet Insurance. Sometime in the second half of this year, the two companies expect that their joint venture will begin offering pet medical insurance to Aflac's tens of millions of customers in Japan. Together, the two companies believe that they can build trust among veterinarians and significantly penetrate the over 10,000 veterinary hospitals in Japan. 

The valuation looks compelling

Currently sitting 59% off its 52-week high share price and 66% off its 52-week low share price, Trupanion's shares are certainly volatile. And at the current $31 share price, it's fair to argue that shares are attractively valued: The stock's price-to-book (P/B) ratio of 4.4 is well below its 12-year median P/B ratio of 8.9. For a business with fundamentals that appear to be intact, this could make Trupanion stock a buy for growth investors with a long-term holding period in mind.