Trupanion (NASDAQ:TRUP) shares rallied more than 4% Thursday following an upgrade from Piper Sandler analysts, who shifted their rating to Overweight from Neutral.
In a note, the analysts cited improving sentiment and multiple catalysts expected to drive the stock higher in the coming months.
Piper Sandler noted that Trupanion’s input costs are now “beginning to approach the long-term 6% average,” which has positively impacted investor sentiment.
They highlighted several near-term catalysts, including the upcoming setting of 2025 guidance and a better understanding of the drag caused by the Pet’s Best business. Meanwhile, the company’s core subscription business is said to continue to exhibit strong growth potential.
The analysts also pointed to the benefits of “multi-year significant rate increases,” which are leading to faster-than-expected underwriting improvements.
In addition, Piper Sandler notes that Trupanion is enhancing claims processing speed and nearing rate adequacy, which Piper Sandler believes will support its ability to meet growth demands in an expanding product category.
A significant boost to investor confidence could come from the resolution of two material weaknesses that were disclosed last year, one related to financial controls and another to technology, according to the firm.
Piper Sandler suggested that the filing of Trupanion’s 2024 10-K may confirm remediation actions have been successful, lifting these weaknesses.
Valuation was another key factor in the upgrade. “Shares are trading at ~11.5x ‘26E adjusted operating income,” the analysts wrote, which they compared favorably to insurance brokers that typically trade at multiples of 20x to 25x.
They believe this makes Trupanion attractively priced, particularly as rate adequacy is achieved and free cash flow improves.
With these factors in mind, Piper Sandler anticipates sustained momentum for Trupanion, driven by a combination of operational improvements, better investor sentiment, and valuation support.