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Palomar (PLMR) Surges 76.5% in a Year: Will the Rally Last?
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Palomar Holdings, Inc.’s (PLMR - Free Report) shares have surged 76.5% in a year compared with the industry's growth of 26.5%. The Finance sector and the Zacks S&P 500 composite have risen 25% and 26.5%, respectively, in the same time frame. With a market capitalization of $2.07 billion, the average volume of shares traded in the last three months was 0.1 million.
Image Source: Zacks Investment Research
The rally was largely driven by new business, strong premium retention rates for existing business and renewals of existing policies and better pricing.
This Zacks Rank #1 (Strong Buy) insurer has a solid earnings surprise history. It beat estimates in each of the last four quarters, the average being 15.10%.
The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 2.9% and 2.7% north, respectively, in the past seven days, reflecting analysts’ optimism on the stock.
Will the Bull Run Continue?
The consensus estimate for Palomar Holdings’s 2024 earnings per share indicates a year-over-year increase of 21.1% from the consensus estimate of 2023. The consensus estimate for 2024 revenues is pinned at $478.68 million, implying a year-over-year improvement of 28.3% from the consensus mark of 2023.
The consensus estimate for 2025 earnings per share indicates a year-over-year increase of 18.3% from the consensus estimate of 2024. The consensus estimate for 2025 revenues is pinned at $592.11 million, implying a year-over-year improvement of 23.7% from the consensus mark of 2024.
Palomar’s return on equity was 19.9%, which expanded 230 basis points year over year. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders.
Premiums, which are the principal component of an insurer’s top line, should continue to benefit from the increased volume of policies written across the lines of business. New business generated, strong retention rates, strategic expansion of products’ geographic and distribution footprint and new partnerships should help in retaining the momentum.
High-quality fixed-income securities, a higher average balance of investments and an increase in fixed-income yields favor improvement in net investment income, which witnessed a five-year CAGR (2018-2023) of 49%. Given a solid investment portfolio and a better interest rate environment, we estimate the metric to witness a three-year CAGR of 59.5%.
Palomar’s fee-generating PLMR-FRONT should fuel growth in the medium term. The addition of the fee-based revenue stream to the business is expected to strengthen its earnings base.
The company’s prudent underwriting expertise is reflected in its combined ratio, which has been under 95% since 2017, except in 2020. PLMR’s risk transfer strategy lowers exposure to major events, which, in turn, reduces earnings volatility.
Palomar has a debt-free balance sheet. Continued operational excellence also helps it maintain a strong capital position.
PLMR expects to generate adjusted net income between $113 million and $118 million in 2024.
Arch Capital has a solid track record of beating earnings estimates in each of the trailing four quarters, the average being 28.41%. In the past year, ACGL has climbed 30.4%.
The Zacks Consensus Estimate for ACGL’s 2024 and 2025 earnings has moved 5.1% and 3.3% north, respectively, in the past 30 days.
RLI Corp. has a solid track record of beating earnings estimates in three of the trailing four quarters and missing in one, the average being 132.39%. In the past year, RLI has gained 8.9%.
The Zacks Consensus Estimate for RLI’s 2024 and 2025 earnings implies year-over-year growth of 16.1% and 3.2%, respectively, from the consensus estimate of the corresponding years.
NMI Holdings has a solid track record of beating earnings estimates in each of the trailing four quarters, the average being 8.60%. In the past year, NMIH has jumped 39.8%.
The Zacks Consensus Estimate for NMIH’s 2024 and 2025 earnings implies year-over-year growth of 9.1% and 8.3%, respectively, from the consensus estimate of the corresponding years.
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Palomar (PLMR) Surges 76.5% in a Year: Will the Rally Last?
Palomar Holdings, Inc.’s (PLMR - Free Report) shares have surged 76.5% in a year compared with the industry's growth of 26.5%. The Finance sector and the Zacks S&P 500 composite have risen 25% and 26.5%, respectively, in the same time frame. With a market capitalization of $2.07 billion, the average volume of shares traded in the last three months was 0.1 million.
Image Source: Zacks Investment Research
The rally was largely driven by new business, strong premium retention rates for existing business and renewals of existing policies and better pricing.
This Zacks Rank #1 (Strong Buy) insurer has a solid earnings surprise history. It beat estimates in each of the last four quarters, the average being 15.10%.
The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 2.9% and 2.7% north, respectively, in the past seven days, reflecting analysts’ optimism on the stock.
Will the Bull Run Continue?
The consensus estimate for Palomar Holdings’s 2024 earnings per share indicates a year-over-year increase of 21.1% from the consensus estimate of 2023. The consensus estimate for 2024 revenues is pinned at $478.68 million, implying a year-over-year improvement of 28.3% from the consensus mark of 2023.
The consensus estimate for 2025 earnings per share indicates a year-over-year increase of 18.3% from the consensus estimate of 2024. The consensus estimate for 2025 revenues is pinned at $592.11 million, implying a year-over-year improvement of 23.7% from the consensus mark of 2024.
Palomar’s return on equity was 19.9%, which expanded 230 basis points year over year. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders.
Premiums, which are the principal component of an insurer’s top line, should continue to benefit from the increased volume of policies written across the lines of business. New business generated, strong retention rates, strategic expansion of products’ geographic and distribution footprint and new partnerships should help in retaining the momentum.
High-quality fixed-income securities, a higher average balance of investments and an increase in fixed-income yields favor improvement in net investment income, which witnessed a five-year CAGR (2018-2023) of 49%. Given a solid investment portfolio and a better interest rate environment, we estimate the metric to witness a three-year CAGR of 59.5%.
Palomar’s fee-generating PLMR-FRONT should fuel growth in the medium term. The addition of the fee-based revenue stream to the business is expected to strengthen its earnings base.
The company’s prudent underwriting expertise is reflected in its combined ratio, which has been under 95% since 2017, except in 2020. PLMR’s risk transfer strategy lowers exposure to major events, which, in turn, reduces earnings volatility.
Palomar has a debt-free balance sheet. Continued operational excellence also helps it maintain a strong capital position.
PLMR expects to generate adjusted net income between $113 million and $118 million in 2024.
Other Stocks to Consider
Some other top-ranked stocks from the P&C insurance industry are Arch Capital Group Ltd. (ACGL - Free Report) , RLI Corp. (RLI - Free Report) and NMI Holdings Inc (NMIH - Free Report) . While Arch Capital and RLI Corp. sport a Zacks Rank #1 each, NMI Holdings carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arch Capital has a solid track record of beating earnings estimates in each of the trailing four quarters, the average being 28.41%. In the past year, ACGL has climbed 30.4%.
The Zacks Consensus Estimate for ACGL’s 2024 and 2025 earnings has moved 5.1% and 3.3% north, respectively, in the past 30 days.
RLI Corp. has a solid track record of beating earnings estimates in three of the trailing four quarters and missing in one, the average being 132.39%. In the past year, RLI has gained 8.9%.
The Zacks Consensus Estimate for RLI’s 2024 and 2025 earnings implies year-over-year growth of 16.1% and 3.2%, respectively, from the consensus estimate of the corresponding years.
NMI Holdings has a solid track record of beating earnings estimates in each of the trailing four quarters, the average being 8.60%. In the past year, NMIH has jumped 39.8%.
The Zacks Consensus Estimate for NMIH’s 2024 and 2025 earnings implies year-over-year growth of 9.1% and 8.3%, respectively, from the consensus estimate of the corresponding years.