Trupanion (TRUP)

Pet insurance provider Trupanion (NASDAQ:TRUP) met Wall Street’s revenue expectations in Q4 CY2025, with sales up 11.7% year on year to $376.9 million. Its GAAP profit of $0.13 per share was 19.6% below analysts’ consensus estimates.

Company Overview

Born from a vision to help pet owners avoid economic euthanasia when faced with expensive veterinary bills, Trupanion (NASDAQ:TRUP) provides medical insurance for cats and dogs through data-driven, vertically-integrated products priced specifically for each pet's unique characteristics.

Property & Casualty (P&C) insurers protect individuals and businesses against financial loss from damage to property or from legal liability. This is a cyclical industry, and the sector benefits when there is 'hard market', characterized by strong premium rate increases that outpace loss and cost inflation, resulting in robust underwriting margins. The opposite is true in a 'soft market'. Interest rates also matter, as they determine the yields earned on fixed-income portfolios. On the other hand, P&C insurers face a major secular headwind from the increasing frequency and severity of catastrophe losses due to climate change. Furthermore, the liability side of the business is pressured by 'social inflation'—the trend of rising litigation costs and larger jury awards.

Trupanion competes with other pet insurance providers including Nationwide (NYSE:NFS), Petplan (owned by Warburg Pincus), ASPCA Pet Health Insurance (through Crum & Forster), and Embrace (part of American Modern Insurance Group), as well as newer entrants like Lemonade (NYSE:LMND) that have expanded into the pet insurance market.

Big picture, insurers generate revenue from three key sources. The first is the core business of underwriting policies. The second source is income from investing the “float” (premiums collected upfront not yet paid out as claims) in assets such as fixed-income assets and equities. The third is fees from various sources such as policy administration, annuities, or other value-added services. Luckily, Trupanion’s revenue grew at an incredible 23.4% compounded annual growth rate over the last five years. Its growth surpassed the average insurance company and shows its offerings resonate with customers, a great starting point for our analysis.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Trupanion’s annualized revenue growth of 13.9% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

This quarter, Trupanion’s year-on-year revenue growth was 11.7%, and its $376.9 million of revenue was in line with Wall Street’s estimates.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For insurance companies, we look at pre-tax profit rather than the operating margin that defines sectors such as consumer, tech, and industrials.

This is because insurers are balance sheet businesses, where assets and liabilities define the core economics. This means that interest income and expense should be factored into the definition of profit but taxes - which are largely out of a company’s control - should not.

Over the last five years, Trupanion’s pre-tax profit margin has fallen by 2.7 percentage points, going from negative 5% to 1.5%. It has also expanded by 5.6 percentage points on a two-year basis, showing its expenses have consistently grown at a slower rate than revenue. This typically signals prudent management.

Trupanion’s pre-tax profit margin came in at 1.7% this quarter. This result was 1.2 percentage points better than the same quarter last year.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Trupanion’s full-year EPS flipped from negative to positive over the last five years. This is a good sign and shows it’s at an inflection point.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Trupanion, its two-year annual EPS growth of 55.3% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q4, Trupanion reported EPS of $0.13, up from $0.04 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Trupanion’s full-year EPS of $0.45 to grow 18%.

The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.

If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.

Trupanion currently has $111.8 million of debt and $383.9 million of shareholder's equity on its balance sheet, and over the past four quarters, has averaged a debt-to-equity ratio of 0.3×. We think this is safe and raises no red flags. In general, we’re comfortable with any ratio below 1.0× for an insurance business. Anything below 0.5× is a bonus.

Return on equity, or ROE, represents the ultimate measure of an insurer's effectiveness, quantifying how well it transforms shareholder investments into profits. Over the long term, insurance companies with robust ROE metrics typically deliver superior shareholder returns through a balanced approach to capital management.

Over the last five years, Trupanion has averaged an ROE of negative 8.2%, a disappointing result relative to the majority of insurers putting up 20%+. But we wouldn’t write off Trupanion given its success in other measures of financial health.

We struggled to find many positives in these results. Overall, this quarter could have been better. The stock remained flat at $32.14 immediately after reporting.

Updated: February 12, 2026 at 4:12 PM EST

Before deciding whether to buy Trupanion or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

We think Trupanion is a good business. First off, its revenue growth was exceptional over the last five years. And while its relatively low ROE suggests management has struggled to find compelling investment opportunities, its astounding EPS growth over the last five years shows its profits are trickling down to shareholders. On top of that, its projected EPS for the next year implies the company will continue generating shareholder value.

Trupanion’s P/B ratio based on the next 12 months is 3.1x. Expectations are high given its premium multiple, but we’ll happily own Trupanion as its fundamentals shine bright. Investments like this should be held patiently for at least three to five years as they benefit from the power of long-term compounding, which more than makes up for any short-term price volatility that comes with high valuations.

Wall Street analysts have a consensus one-year price target of $50.75 on the company (compared to the current share price of $32.14).