Palomar (PLMR) Surges 76.5% in a Year: Will the Rally Last?

Company Performance - Palomar Holdings, Inc. (PLMR) shares have increased by 76.5% over the past year, significantly outperforming the industry growth of 26.5% and the Finance sector's rise of 25% [1] - The company has a market capitalization of $2.07 billion, with an average trading volume of 0.1 million shares over the last three months [1] Business Drivers - The surge in PLMR's stock price is attributed to new business acquisition, strong premium retention rates, renewals of existing policies, and improved pricing strategies [2] - The company has a strong earnings surprise history, beating estimates in the last four quarters with an average surprise of 15.10% [2] Earnings Estimates - The consensus estimate for PLMR's 2024 earnings per share indicates a year-over-year increase of 21.1% compared to 2023, with revenues expected to reach $478.68 million, reflecting a 28.3% improvement [3] - For 2025, the earnings per share is projected to grow by 18.3% from 2024, with revenues estimated at $592.11 million, indicating a 23.7% increase [4] Profitability and Investment - Palomar's return on equity stands at 19.9%, having expanded by 230 basis points year-over-year, showcasing effective utilization of shareholder equity [4] - The company has experienced a five-year compound annual growth rate (CAGR) of 49% in net investment income, with expectations of a three-year CAGR of 59.5% due to a solid investment portfolio and favorable interest rates [6] Strategic Initiatives - The introduction of fee-generating services through PLMR-FRONT is anticipated to enhance growth in the medium term, strengthening the earnings base [7] - The company maintains a combined ratio under 95% since 2017, reflecting prudent underwriting practices, and has a debt-free balance sheet, contributing to a strong capital position [7][8] Future Outlook - Palomar expects to generate adjusted net income between $113 million and $118 million in 2024, indicating a positive outlook for the company's financial performance [8]