PLMR Outperforms Industry, Trades at Premium: How to Play the Stock

Core Insights - Palomar Holdings, Inc. (PLMR) has seen its shares increase by 85.4% over the past year, significantly outperforming its industry and broader market indices [1] - The company has a market capitalization of $4.12 billion and an average trading volume of 0.3 million shares over the last three months [1] Stock Performance - PLMR shares closed at $154.25, trading above the 200-day simple moving average of $122.68, indicating strong upward momentum [2] Valuation Metrics - PLMR shares are trading at a price-to-book value of 5.22X, which is considerably higher than the industry average of 1.57X, indicating a premium valuation [3] Growth Projections - The Zacks Consensus Estimate projects a 39.2% year-over-year increase in earnings per share for 2025, with revenues expected to rise by 42.5% to $782.98 million [4] - For 2026, earnings per share and revenues are estimated to increase by 17% and 26.3%, respectively, compared to 2025 estimates [4] Analyst Sentiment - Four out of six analysts covering PLMR have raised their earnings estimates for 2025, and three out of five have done so for 2026 in the past 30 days, leading to a 2% and 1.5% increase in consensus estimates for those years [10] Financial Strength - PLMR maintains a debt-free balance sheet and a strong capital position, with an adjusted net income guidance raised to $186-$200 million for 2025 [9][18] - The company has a return on equity of 20.5%, significantly higher than the industry average of 7.8%, and a return on invested capital of 19.9%, compared to the industry average of 5.9% [13] Growth Drivers - Factors driving growth include increasing policy volumes, strong retention rates, geographic expansion, and new partnerships, with crop insurance projected to contribute around $200 million in premiums by 2025 [15] - The company identifies Surety as a long-term growth opportunity, which is not correlated with traditional property and casualty insurance cycles [16] Investment Strategy - PLMR's risk transfer strategy helps mitigate exposure to catastrophic events, contributing to a stable business model [20] - The average target price for PLMR shares is $183, suggesting a potential upside of 19.31% from the last closing price [11]