Amid a soft session on Wall Street Tuesday, pet medical insurance specialist Trupanion (US:TRUP) generated a conspicuously dispirited performance, losing more than 3% of equity value. Billed as a leader in the insurance space for cats and dogs, Trupanion theoretically benefits from a large addressable market thanks to America’s love for its furry friends.

Unfortunately, TRUP stock continues to struggle to find its footing.

The shares are down almost 27% year to date, compared to a 4.8% decline in the share price of pet insurance rival Lemonade (US:LMND).

Contributing to Trupanion shares’ recent volatility stands a bearish assessment from analysts at PAA Research. The firm tweeted that “regulatory scrutiny is escalating rapidly while operating performance continues to deteriorate” at the Seattle pet insurer. Notably, the company announced late last month that its chief financial officer will be stepping down in June.

Tough Case to Stomach

Financially, TRUP stock presents a tough case for prospective investors to stomach. Data from Fintel shows that in 2020, Trupanion incurred a net loss of $5.84 million. Sadly, circumstances only worsened from there. In the following year, the pet health insurer posted a net loss of $35.53 million. And last year, this metric reached almost $45 million.

On Monday, options traders responded to PAA Research’s negative take on TRUP stock. Fintel’s screener for unusual stock options volume revealed that put volume hit 10,810 contracts against an open interest reading of 8,701. On average, put volume reaches 545 contracts. On the other end of the scale, call volume was robust but only reached 7,142 contracts against open interest of 3,115. Typically, call volume pings at 191 contracts.

Drilling deeper into the derivatives market, the put/call ratio for TRUP stock climbed to a lofty 2.79. The put/call ratio shows the total number of disclosed open put option positions divided by the number of open call options. Since puts are generally a bearish bet and calls are a bullish bet, put/call ratios greater than 1 indicate a bearish sentiment, and ratios less than one indicate a bullish sentiment.

Short Cover Days Concern

Nevertheless, traders will want to be cautious about adopting a cynical approach to TRUP stock. Fintel warns that Trupanion’s short interest stands at 29.92% of its float. Its short interest ratio pings at 10.82 days to cover. Also, TRUP’s off-exchange short-volume ratio comes out to 57.20%.

Moreover, TRUP stock hit 82.24 out of 100 in Fintel’s Short Squeeze Score. This metric is the result of a sophisticated, multi-factor quantitative model that identifies companies that have the highest risk of experiencing a short squeeze. Higher numbers indicate a higher risk of a short squeeze materializing relative to its peers.

Pet Spending Gains

Notably, the American Pet Products Association stated that in 2022, Americans spent $136.8 billion on their pets. Within this tally, the combination of veterinary care and product sales and other services amounted to $47.3 billion.

USA Today last month reported that pet insurance costs around $55 per month for an unlimited accident and illness plan for dogs. For a cat, that cost for the same plan is about $47 per month.

The company’s products shared fifth-place in Forbes Advisor’s most recent rating of “Best Pet Insurance Companies Of April 2023,” garnering four stars out of five. Its plan was selected as “Best for Lowest Out-Of-Pocket Claims Costs.”

That TRUP stock has apparently not been able to benefit from this clear sector tailwind poses serious concerns about Trupanion’s viability.

This article originally appeared on Fintel

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.