Trupanion (TRUP) Down to Strong Sell on Dismal Q4 Earnings - Analyst Blog

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On Mar 25, 2015, Zacks Investment Research downgraded Trupanion Inc. TRUP by a notch to a Zacks Rank #5 (Strong Sell) from a Zacks Rank #4 (Sell).

Why the Downgrade?

Trupanion has been witnessing declining earnings estimates ever since it announced dismal fourth-quarter 2014 results on Feb 12, reporting an operating loss of 16 cents per share, slightly lower than the Zacks Consensus Estimate of a loss of 22 cents. Thus, Trupanion delivered negative earnings surprises in the trailing four quarters, with an average of 197.9%.

Net loss of $4.3 million during the quarter widened substantially from a net loss of $3.2 million in the year-ago quarter. Top-line growth of 32.9% was more than offset by rise of 32.2% in cost of revenues and 47% in total operating expenses.

Even adjusted EBITDA stood at a loss of $2.9 million against $1.8 million in the prior-year quarter. Subsequently, operating cash outflow increased to $10.8 million at 2014-end from $1 million at 2013-end.

Going forward, Trupanion continues to expect a negative EBITDA of $10-$15 million in 2015, despite 25-29% growth projection in total revenue. The bleak outlook indicates higher expenses to maintain the retention rate and combat competition in the business.

Following Trupanion's fourth-quarter earnings, the company witnessed sluggish estimate revisions, reflecting a lackluster outlook. The Zacks Consensus Estimate for 2015 moved up a penny to a loss of 63 cents, the same for 2016 fell by 3 cents to a loss of 32 cents, in the last 60 days.

Moreover, the Most Accurate estimate for Trupanion's 2016 loss currently stands at 39 cents a share, which translates into an Earnings ESP of -21.9%. This indicates the possibility of an earnings miss next year as well.

Other Stocks to Consider

Investors interested in the insurance industry could consider stocks like Employers Holdings, Inc. EIG , Amerisafe Inc. AMSF and Arch Capital Group Ltd. ACGL . All of these stocks sport aZacks Rank #1 (Strong Buy).

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: AMSF , ACGL , EIG , TRUP

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