Intrinsic value of Trupanion, Inc. - TRUP

Previous Close

$29.72

  Intrinsic Value

$9.08

stock screener

  Rating & Target

str. sell

-69%

Previous close

$29.72

 
Intrinsic value

$9.08

 
Up/down potential

-69%

 
Rating

str. sell

We calculate the intrinsic value of TRUP stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 1.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  24.20
  22.28
  20.55
  19.00
  17.60
  16.34
  15.20
  14.18
  13.26
  12.44
  11.69
  11.03
  10.42
  9.88
  9.39
  8.95
  8.56
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.00
  5.90
Revenue, $m
  378
  462
  557
  662
  779
  906
  1,044
  1,192
  1,350
  1,518
  1,695
  1,882
  2,079
  2,284
  2,498
  2,722
  2,955
  3,198
  3,450
  3,711
  3,984
  4,267
  4,561
  4,866
  5,184
  5,515
  5,859
  6,217
  6,591
  6,980
Variable operating expenses, $m
  368
  449
  541
  644
  757
  881
  1,015
  1,159
  1,312
  1,475
  1,647
  1,828
  2,019
  2,219
  2,427
  2,644
  2,871
  3,106
  3,351
  3,605
  3,870
  4,144
  4,430
  4,727
  5,036
  5,357
  5,691
  6,039
  6,402
  6,780
Fixed operating expenses, $m
  9
  9
  10
  10
  10
  10
  10
  11
  11
  11
  11
  12
  12
  12
  12
  13
  13
  13
  14
  14
  14
  15
  15
  15
  16
  16
  16
  17
  17
  17
Total operating expenses, $m
  377
  458
  551
  654
  767
  891
  1,025
  1,170
  1,323
  1,486
  1,658
  1,840
  2,031
  2,231
  2,439
  2,657
  2,884
  3,119
  3,365
  3,619
  3,884
  4,159
  4,445
  4,742
  5,052
  5,373
  5,707
  6,056
  6,419
  6,797
Operating income, $m
  1
  3
  6
  8
  11
  15
  19
  23
  27
  31
  37
  42
  48
  53
  59
  65
  72
  78
  85
  92
  100
  108
  116
  124
  133
  142
  152
  161
  172
  183
EBITDA, $m
  7
  10
  14
  18
  23
  28
  34
  40
  46
  53
  60
  68
  76
  84
  93
  102
  112
  122
  132
  143
  154
  166
  178
  191
  204
  217
  232
  246
  262
  278
Interest expense (income), $m
  0
  1
  3
  6
  8
  11
  15
  18
  22
  26
  30
  35
  40
  45
  51
  56
  62
  69
  75
  82
  89
  96
  104
  112
  120
  128
  137
  146
  156
  166
  176
Earnings before tax, $m
  -1
  0
  0
  0
  0
  0
  0
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
Net income, $m
  -1
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  234
  286
  345
  410
  482
  561
  646
  738
  836
  940
  1,050
  1,166
  1,287
  1,414
  1,547
  1,686
  1,830
  1,980
  2,136
  2,298
  2,467
  2,642
  2,824
  3,013
  3,210
  3,415
  3,628
  3,850
  4,081
  4,322
Adjusted assets (=assets-cash), $m
  234
  286
  345
  410
  482
  561
  646
  738
  836
  940
  1,050
  1,166
  1,287
  1,414
  1,547
  1,686
  1,830
  1,980
  2,136
  2,298
  2,467
  2,642
  2,824
  3,013
  3,210
  3,415
  3,628
  3,850
  4,081
  4,322
Revenue / Adjusted assets
  1.615
  1.615
  1.614
  1.615
  1.616
  1.615
  1.616
  1.615
  1.615
  1.615
  1.614
  1.614
  1.615
  1.615
  1.615
  1.614
  1.615
  1.615
  1.615
  1.615
  1.615
  1.615
  1.615
  1.615
  1.615
  1.615
  1.615
  1.615
  1.615
  1.615
Average production assets, $m
  52
  64
  77
  91
  107
  125
  144
  164
  186
  209
  234
  260
  287
  315
  345
  376
  408
  441
  476
  512
  550
  589
  629
  672
  715
  761
  809
  858
  909
  963
Working capital, $m
  -34
  -42
  -51
  -60
  -71
  -82
  -95
  -108
  -123
  -138
  -154
  -171
  -189
  -208
  -227
  -248
  -269
  -291
  -314
  -338
  -363
  -388
  -415
  -443
  -472
  -502
  -533
  -566
  -600
  -635
Total debt, $m
  32
  53
  78
  105
  135
  168
  203
  242
  282
  326
  371
  419
  470
  523
  578
  636
  696
  758
  823
  891
  961
  1,034
  1,109
  1,188
  1,270
  1,355
  1,444
  1,536
  1,632
  1,732
Total liabilities, $m
  97
  119
  143
  171
  201
  233
  269
  307
  348
  391
  437
  485
  535
  588
  644
  701
  761
  824
  889
  956
  1,026
  1,099
  1,175
  1,253
  1,335
  1,420
  1,509
  1,601
  1,698
  1,798
Total equity, $m
  137
  167
  201
  239
  282
  328
  377
  431
  488
  549
  613
  681
  752
  826
  903
  984
  1,069
  1,156
  1,247
  1,342
  1,441
  1,543
  1,649
  1,760
  1,875
  1,994
  2,119
  2,248
  2,383
  2,524
Total liabilities and equity, $m
  234
  286
  344
  410
  483
  561
  646
  738
  836
  940
  1,050
  1,166
  1,287
  1,414
  1,547
  1,685
  1,830
  1,980
  2,136
  2,298
  2,467
  2,642
  2,824
  3,013
  3,210
  3,414
  3,628
  3,849
  4,081
  4,322
Debt-to-equity ratio
  0.230
  0.320
  0.390
  0.440
  0.480
  0.510
  0.540
  0.560
  0.580
  0.590
  0.610
  0.620
  0.630
  0.630
  0.640
  0.650
  0.650
  0.660
  0.660
  0.660
  0.670
  0.670
  0.670
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.690
Adjusted equity ratio
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
Depreciation, amort., depletion, $m
  6
  7
  8
  10
  11
  13
  15
  17
  19
  22
  23
  26
  28
  31
  34
  37
  40
  44
  47
  51
  54
  58
  62
  66
  71
  75
  80
  85
  90
  95
Funds from operations, $m
  5
  7
  8
  10
  12
  13
  15
  18
  20
  22
  25
  27
  30
  33
  36
  39
  43
  46
  50
  53
  57
  61
  65
  70
  74
  79
  84
  89
  94
  100
Change in working capital, $m
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
Cash from operations, $m
  12
  14
  17
  19
  22
  25
  28
  31
  34
  38
  41
  44
  48
  52
  56
  60
  64
  68
  72
  77
  82
  87
  92
  97
  103
  109
  115
  122
  128
  135
Maintenance CAPEX, $m
  -4
  -5
  -6
  -8
  -9
  -11
  -12
  -14
  -16
  -18
  -21
  -23
  -26
  -28
  -31
  -34
  -37
  -40
  -44
  -47
  -51
  -54
  -58
  -62
  -66
  -71
  -75
  -80
  -85
  -90
New CAPEX, $m
  -10
  -12
  -13
  -15
  -16
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -47
  -49
  -52
  -54
Cash from investing activities, $m
  -14
  -17
  -19
  -23
  -25
  -29
  -31
  -34
  -38
  -41
  -45
  -49
  -53
  -56
  -61
  -65
  -69
  -73
  -79
  -83
  -89
  -93
  -99
  -104
  -110
  -117
  -122
  -129
  -137
  -144
Free cash flow, $m
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -8
Issuance/(repayment) of debt, $m
  19
  22
  24
  27
  30
  33
  35
  38
  41
  43
  46
  48
  51
  53
  55
  58
  60
  62
  65
  67
  70
  73
  76
  79
  82
  85
  89
  92
  96
  100
Issuance/(repurchase) of shares, $m
  27
  31
  35
  38
  42
  46
  49
  53
  57
  60
  63
  66
  69
  72
  76
  79
  82
  85
  89
  92
  96
  99
  103
  107
  112
  116
  121
  126
  131
  136
Cash from financing (excl. dividends), $m  
  46
  53
  59
  65
  72
  79
  84
  91
  98
  103
  109
  114
  120
  125
  131
  137
  142
  147
  154
  159
  166
  172
  179
  186
  194
  201
  210
  218
  227
  236
Total cash flow (excl. dividends), $m
  44
  50
  56
  63
  69
  75
  82
  88
  93
  99
  104
  110
  115
  120
  126
  131
  136
  142
  148
  153
  159
  166
  172
  179
  186
  194
  202
  210
  219
  228
Retained Cash Flow (-), $m
  -27
  -31
  -35
  -38
  -42
  -46
  -50
  -54
  -57
  -61
  -64
  -68
  -71
  -74
  -78
  -81
  -84
  -88
  -91
  -95
  -98
  -102
  -106
  -111
  -115
  -120
  -124
  -130
  -135
  -141
Prev. year cash balance distribution, $m
  19
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  36
  19
  22
  24
  27
  29
  32
  34
  36
  38
  40
  42
  44
  46
  48
  50
  52
  54
  57
  59
  61
  63
  66
  69
  71
  74
  77
  80
  84
  87
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  35
  18
  19
  20
  21
  21
  21
  21
  21
  20
  19
  18
  17
  15
  14
  13
  11
  10
  9
  7
  6
  5
  4
  3
  3
  2
  2
  1
  1
  1
Current shareholders' claim on cash, %
  97.0
  94.3
  91.9
  89.7
  87.8
  86.0
  84.4
  83.0
  81.6
  80.4
  79.2
  78.2
  77.2
  76.2
  75.4
  74.6
  73.8
  73.0
  72.3
  71.7
  71.0
  70.4
  69.8
  69.3
  68.7
  68.2
  67.7
  67.2
  66.7
  66.2

Trupanion, Inc. provides medical insurance plans for cats and dogs throughout the United States, Canada and Puerto Rico. The Company operates in two business segments: subscription business and other business. The subscription business segment includes monthly subscriptions for its medical plan, which are marketed to consumers. The other business segment includes other operations that are not directly marketed to consumers. The Company offers a software solution, Trupanion Express, which is designed to facilitate the direct payment of invoices to veterinary practices. Trupanion Express integrates with veterinarians' practice management software, which allows the Company to access data. The Company's subsidiaries include American Pet Insurance Company, Trupanion Managers USA, Inc., Trupanion Brokers Ontario, Inc. and Wyndham Insurance Company (SAC), Ltd.

FINANCIAL RATIOS  of  Trupanion, Inc. (TRUP)

Valuation Ratios
P/E Ratio -125.2
Price to Sales 4.7
Price to Book 19.5
Price to Tangible Book
Price to Cash Flow 175.3
Price to Free Cash Flow 292.2
Growth Rates
Sales Growth Rate 27.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -60%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 11.1%
Total Debt to Equity 11.1%
Interest Coverage 0
Management Effectiveness
Return On Assets -9.2%
Ret/ On Assets - 3 Yr. Avg. -18.6%
Return On Total Capital -14.7%
Ret/ On T. Cap. - 3 Yr. Avg. -28.6%
Return On Equity -15.6%
Return On Equity - 3 Yr. Avg. -40.2%
Asset Turnover 2.5
Profitability Ratios
Gross Margin 17.6%
Gross Margin - 3 Yr. Avg. 17.3%
EBITDA Margin -1.6%
EBITDA Margin - 3 Yr. Avg. -8.9%
Operating Margin -3.7%
Oper. Margin - 3 Yr. Avg. -9.7%
Pre-Tax Margin -3.7%
Pre-Tax Margin - 3 Yr. Avg. -11.1%
Net Profit Margin -3.7%
Net Profit Margin - 3 Yr. Avg. -11.1%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

TRUP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TRUP stock intrinsic value calculation we used $304 million for the last fiscal year's total revenue generated by Trupanion, Inc.. The default revenue input number comes from 0001 income statement of Trupanion, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our TRUP stock valuation model: a) initial revenue growth rate of 24.2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for TRUP is calculated based on our internal credit rating of Trupanion, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Trupanion, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of TRUP stock the variable cost ratio is equal to 97.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $9 million in the base year in the intrinsic value calculation for TRUP stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 10.8% for Trupanion, Inc..

Corporate tax rate of 27% is the nominal tax rate for Trupanion, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the TRUP stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for TRUP are equal to 13.8%.

Life of production assets of 10.1 years is the average useful life of capital assets used in Trupanion, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for TRUP is equal to -9.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $129.173 million for Trupanion, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 34.494 million for Trupanion, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Trupanion, Inc. at the current share price and the inputted number of shares is $1.0 billion.

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