Investors in Trupanion (NASDAQ:TRUP) from three years ago are still down 71%, even after 10% gain this past week

It's nice to see the Trupanion, Inc. (NASDAQ:TRUP) share price up 10% in a week. But that is meagre solace in the face of the shocking decline over three years. The share price has sunk like a leaky ship, down 71% in that time. So we're relieved for long term holders to see a bit of uplift. Only time will tell if the company can sustain the turnaround.

On a more encouraging note the company has added US$94m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

See our latest analysis for Trupanion

Trupanion isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over three years, Trupanion grew revenue at 25% per year. That is faster than most pre-profit companies. So on the face of it we're really surprised to see the share price down 20% a year in the same time period. You'd want to take a close look at the balance sheet, as well as the losses. Sometimes fast revenue growth doesn't lead to profits. Unless the balance sheet is strong, the company might have to raise capital.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. If you are thinking of buying or selling Trupanion stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

Trupanion shareholders are down 23% for the year, but the market itself is up 27%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with Trupanion .

We will like Trupanion better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.