Trupanion BUY Target Price You Lucky Dog$ 13

TRUP : NYSE : US$9.07
Target: US$13.00

Trupanion is a leading provider of medical insurance
plans for cats and dogs in North America. Trupanion’s
core product covers accidents, illnesses, diagnostic
testing, surgeries, medications, and hospital stays. Pet
owners can also select extra packages that cover items
such as boarding fees, acupuncture, or physical therapy
for an additional monthly cost.
All amounts in US$ unless otherwise noted.

Technology — Internet
In its first quarter as a public company, Trupanion reported strong Q2
results that were in line with the expected ranges disclosed in the S1.
The company added ~13k new pets and finished the quarter with ~195k
enrolled pets, model efficiency remained high (LVP/PAC of 5.4x), and
revenue guidance for the rest of the year exceeded our estimates. We
continue to believe Trupanion’s strong customer satisfaction (98.65%
retention rate in Q2) and strong vet relationships will enable the
company to effectuate much higher levels of pet insurance penetration in
the US and Canada, leading to a long runway for growth.
Key Points
Bullish: Revenue growth of 42% decelerated only very slightly from
44% in Q1; the LVP/PAC ratio of 5.4x was above the company’s 5.0
target; revenue guidance for Q3 and 2014 was well ahead of our
Bearish: Trupanion remains in investment mode and as previously
discussed should continue to be in an EBITDA loss position through
Estimate changes: We are marginally increasing our revenue
estimates. Our 2014 and 2015 revenue and non-GAAP EPS
estimates go to $115M/$(0.44) and $149.6M/$(0.26) from
$113.1M/$(0.43) and $146.9M/$(0.26).
We maintain our BUY recommendation. Our $13 price target is based
on 2.5x our 2015 revenue estimate of $147 millio


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