Trupanion (TRUP)

Pet insurance provider Trupanion (NASDAQ:TRUP) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 12.1% year on year to $366.9 million. Its GAAP profit of $0.13 per share was 90.3% above 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.

Insurance companies earn revenue from three primary sources: 1) The core insurance business itself, often called underwriting and represented in the income statement as premiums 2) Income from investing the “float” (premiums collected upfront not yet paid out as claims) in assets such as fixed-income assets and equities 3) Fees from various sources such as policy administration, annuities, or other value-added services. Thankfully, Trupanion’s 24.7% annualized revenue growth over the last five years was incredible. Its growth beat the average insurance company and shows its offerings resonate with customers, a helpful starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Trupanion’s annualized revenue growth of 15% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

This quarter, Trupanion reported year-on-year revenue growth of 12.1%, and its $366.9 million of revenue exceeded Wall Street’s estimates by 1.3%.

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 four years, Trupanion’s pre-tax profit margin has fallen by 6.3 percentage points, going from negative 5% to 1.2%. It has also expanded by 6.2 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 1.8% this quarter. This result was 1.4 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 encouraging and shows it’s at a critical moment in its life.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Trupanion, its two-year annual EPS growth of 51% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q3, Trupanion reported EPS of $0.13, up from $0.03 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Trupanion’s full-year EPS of $0.35 to shrink by 12.7%.

Insurance companies are balance sheet businesses, collecting premiums upfront and paying out claims over time. The float–premiums collected but not yet paid out–are invested, creating an asset base supported by a liability structure. Book value per share (BVPS) captures this dynamic by measuring these assets (investment portfolio, cash, reinsurance recoverables) less liabilities (claim reserves, debt, future policy benefits). BVPS is essentially the residual value for shareholders.

We therefore consider BVPS very important to track for insurers and a metric that sheds light on business quality because it reflects long-term capital growth and is harder to manipulate than more commonly-used metrics like EPS.

Trupanion’s BVPS grew at an incredible 16% annual clip over the last five years. However, BVPS growth has recently decelerated to 10.8% annual growth over the last two years (from $6.95 to $8.53 per share).

Over the next 12 months, Consensus estimates call for Trupanion’s BVPS to remain flat at roughly $8.34, a disappointing projection.

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 $113.8 million of debt and $368.6 million of shareholder's equity on its balance sheet, and over the past four quarters, has averaged a debt-to-equity ratio of 0.4×. 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 (ROE) is a crucial yardstick for insurance companies, measuring their ability to generate returns on the capital provided by shareholders. Insurers that consistently deliver superior ROE tend to create more value for their investors over time through strategic capital allocation and shareholder-friendly policies.

Over the last five years, Trupanion has averaged an ROE of negative 8.9%, 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.

It was good to see Trupanion beat analysts’ EPS expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. Zooming out, we think this quarter featured some important positives. Investors were likely hoping for more, and shares traded down 3.2% to $40.82 immediately following the results.

Updated: December 4, 2025 at 11:17 PM EST

Before investing in or passing on Trupanion, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

In our opinion, Trupanion is a solid company. To kick things 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 4.2x. This multiple tells us that a lot of good news is priced in. Add this one to your watchlist and come back to it later.

Wall Street analysts have a consensus one-year price target of $54.75 on the company (compared to the current share price of $36.91).