A month has gone by since the last earnings report for Palomar (PLMR Quick QuotePLMR - Free Report) . Shares have lost about 24.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Palomar due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Palomar Q4 Loss In Line, Revenues Miss Estimates

Palomar Holdings, Inc. reported fourth-quarter 2020 operating loss of 5 cents per share, in line with the Zacks Consensus Estimate. However, the bottom line compared unfavorably with the year-ago earnings of 48 cents.

Palomar witnessed higher expenses and underwriting loss in the reported quarter, partially offset by improved premiums.

Behind the Q4 Headlines

Total revenues improved 25.7% year over year to $42.1 million, mainly attributable to higher premiums, net investment income and commission and other income. However, the top line missed the Zacks Consensus Estimate by 5.2%.

Gross written premiums increased 31% year over year to $96.1 million. Net written premiums decreased 3.5% year over year to $42.3 million owing to decline in ceded written premiums.

Net investment income increased 29% year over year to $2.3 million. The increase was the result of a higher average balance of investments held attributable primarily to cash generated from operations as well as proceeds from the company’s January and June 2020 stock offerings. However, lower yields on invested assets were partial offsets. Palomar witnessed underwriting loss of about $5 million versus underwriting income of $11.4 million in the year-earlier period.

Total expenses more than doubled to $44.7 million due to higher losses and loss adjustment expenses, interest expenses and acquisition expenses. Adjusted combined ratio, excluding catastrophe losses, deteriorated 1310 basis points (bps) year over year to 73.8%.

Full-Year Highlights

Adjusted net earnings of 35 cents per share missed the Zacks Consensus Estimate of 43 cents. The bottom line declined from $1.73 earned in 2019.
Operating total revenues were $167 million, up 53.4% year over year. The top line marginally missed the Zacks Consensus Estimate. Adjusted combined ratio excluding catastrophe losses was 67.5%, deteriorated 420 bps year over year.

Financial Update

As of Dec 31, 2020, Palomar Holdings had assets worth $699.7 million, up 76.9% from the level at 2019 end. Cash and cash equivalents increased 1.3% from 2019-end level to about $33.5 million. Shareholder equity at 2020 end increased 6.4% from 2019-end to $363.7 million. Annualized adjusted return on equity was 3% in 2020, compared with 24.1% in 2019.

2021 Outlook

Palomar Holdings estimates adjusted net income between $62 million and $67 million, which includes the impact of winter storm Uri in Texas.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

At this time, Palomar has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Palomar has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.