If you know anything about the United States, you know that Americans love their pets. In many cases, people here tend to love their four-legged friends more so than their actual family members. To that end, pet insurance company Trupanion (TRUP) – which specializes in health coverage for cats and dogs – should perform well. Unfortunately, the opposite is true, with TRUP stock worryingly unable to generate traction. Frankly, that’s a massive problem.
Since the beginning of the year, TRUP stock gave up nearly 24% of equity value. In the trailing one-year period, shares plunged over 57%. To be fair, the red ink by itself doesn’t necessarily make Trupanion negatively remarkable. However, with the enormous market size of the U.S. pet industry, TRUP really should be one of the publicly tradable securities rising higher in this environment.
For example, just the U.S. pet food market alone may grow by $12 billion during 2020 through 2026, progressing at a compound annual growth rate (CAGR) of 5.7% during the forecast period, according to analysts at Report Ocean. As well, millennials at 32% represent the demographic with the highest percentage of pet ownership.
In other words, this is a growth market tied to a demographic growth market that will continue to rise in spending power. In addition, Generation Z is no slouch either in the pet ownership department at 24%, right behind millennials. Therefore, TRUP stock theoretically benefits from one of the most compelling economic sectors.
Still, that didn’t save TRUP stock from being a rather unfortunate highlight in Barchart’s screener for unusual stock options volume. Following the close of April 18, total volume reached 7,716 contracts against an open interest reading of 23,744. The delta between the Tuesday session volume and the one-month average volume came out to 333.24%.
Drilling into the details, put volume hit 4,715 contracts while call volume fell a bit short at 3,001. This pairing yielded a put/call volume ratio of 1.57, on paper favoring the bearish side of the trade. Given the trailing five-day loss of 22.49%, the pessimists aren’t exactly wrong.
TRUP Stock is Not Getting it Done Despite Industry Help
In many ways, the broader pet care industry appears to be recession resistant. Predominantly, you have the collective fascination with furry creatures that keeps the cash register ringing. In addition, the data continues to print favorable numbers for sector players. Finally, with demographic winds also blowing in the right direction, TRUP stock has all the backdrop help it could want.
Plus, the canvas may be even brighter than the optimists imagine. According to the American Pet Products Association, total U.S. pet industry expenditures hit $136.8 billion last year. This tally represents a 10.7% lift from the prior year’s result of $123.6 billion. An incoming recession? Maybe not for the pet care segment.
What’s more, veterinary care and product sales hit $35.9 billion in sales. Other services managed to ring up $11.4 billion. Therefore, the areas relevant to the pet health insurance space racked up revenue of $47.3 billion. You couldn’t ask for a better set of circumstances. Yet TRUP stock has not looked the same since skyrocketing in 2020.
To be fair, in the trailing five years, Trupanion shares gained more than 25% of equity value. However, that’s quite disappointing when you look at the pet industry expenditures tally during the same period. In 2018, the sector saw total revenue of $90.5 billion. So, in five years’ time, the industry itself expanded over 51%.
What’s more, the post-pandemic new normal has been excellent for pet care, perhaps because pet owners (or pet parents to use the common lexicon) have been able to spend more quality time together. Sadly, Trupanion hasn’t been able to tap into this enthusiasm. Frankly, that’s disappointing, leading to questions about TRUP stock.
Tough Technical Outlook
Not surprisingly, the Barchart Technical Opinion indicator rates TRUP stock as a 100% sell. As stated earlier, in the past week, shares plunged over 22%. In the trailing month, they tanked just over 40%. Basically in freefall, attempting to find a bottom here is akin to catching knives.
Just for good measure, Barchart also warns that TRUP’s 60-month beta pings at 1.71. That’s incredibly volatile compared to the benchmark S&P 500. Stocks that trade alongside the broader market should have a beta of 1.
Interestingly, analyst opinion so far is somewhat split for TRUP stock. Overall, the consensus ranks as moderate buy, breaking down as four strong buys and four holds. However, if Trupanion keeps printing red ink, it’ll be difficult for the bullish experts to justify their optimism. Therefore, unless you have a compelling reason to go against the grain, you might want to steer clear of TRUP.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
