Palomar (PLMR Quick QuotePLMR - Free Report) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving.

Analysts' growing optimism on the earnings prospects of this insurance holding company is driving estimates higher, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- is principally built on this insight.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

Consensus earnings estimates for the next quarter and full year have moved considerably higher for Palomar, as there has been strong agreement among the covering analysts in raising estimates.

Current-Quarter Estimate Revisions

For the current quarter, the company is expected to earn $1.54 per share, which is a change of +41.28% from the year-ago reported number.

Over the last 30 days, three estimates have moved higher for Palomar while one has gone lower. As a result, the Zacks Consensus Estimate has increased 5.11%.

Current-Year Estimate Revisions

The company is expected to earn $6.54 per share for the full year, which represents a change of +28.49% from the prior-year number.

The revisions trend for the current year also appears quite promising for Palomar, with five estimates moving higher over the past month compared to no negative revisions. The consensus estimate has also received a boost over this time frame, increasing 10.37%.

Favorable Zacks Rank

Thanks to promising estimate revisions, Palomar currently carries a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

Palomar shares have added 13.9% over the past four weeks, suggesting that investors are betting on its impressive estimate revisions. So, you may consider adding it to your portfolio right away to benefit from its earnings growth prospects.