Yahoo Finance Here's Why You Should Add Palomar Holdings (PLMR) to Your Kitty
Palomar Holdings, Inc. PLMR is well-poised to gain from strong premium retention rates, new partnerships, rate increases and effective capital deployment.
Growth Projections
The Zacks Consensus Estimate for Palomar Holdings’ 2024 earnings per share indicates a year-over-year increase of 25.7%. The consensus estimate for revenues is pegged at $492.41 million, implying a year-over-year improvement of 32%.
The consensus estimate for 2025 earnings per share and revenues indicates an increase of 17.8% and 22.7%, respectively, from the corresponding 2024 estimates.
Estimate Revision
The Zacks Consensus Estimate for 2023 and 2024 has moved 3.8% and 3.2% north, respectively, in the past 30 days. This should instill investors' confidence in the stock.
Zacks Rank
Palomar Holdings currently sports a Zacks Rank #1 (Strong Buy). The stock has gained 43.9% over the past year, outperforming the industry's growth of 22.6%.
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Return on Equity (ROE)
Return on equity is a measure of profitability reflecting how efficiently the company is utilizing its shareholders’ value. Annualized adjusted return on equity expanded 200 basis points year over year to 22.9% in the first quarter of 2024. Also, the return on invested capital in the trailing 12 months was 17.9%, which was better than the industry average of 5.9%, reflecting the company’s efficiency in utilizing funds to generate income.
Business Tailwinds
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 Holdings’ 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 Holdings 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 property and casualty insurance industry are HCI Group, Inc. HCI, RLI Corp. RLI and NMI Holdings Inc NMIH. While HCI Group sports a Zacks Rank #1, RLI and NMI Holdings carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
HCI Group’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 139.15%. In the past year, shares of HCI have surged 68.9%.
The Zacks Consensus Estimate for HCI’s 2024 and 2025 earnings implies year-over-year growth of 57.6% and 4.2%, respectively.
RLI has a solid track record of beating earnings estimates in three of the last four quarters while missing in one, the average being 132.39%. In the past year, RLI has jumped 47.7%.
The Zacks Consensus Estimate for RLI’s 2024 and 2025 earnings implies year-over-year growth of 18.2% and 2.6%, respectively.
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 climbed 25.6%.
The Zacks Consensus Estimate for NMIH’s 2024 and 2025 earnings implies year-over-year growth of 10.6% and 7.6%, respectively.
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Palomar Holdings, Inc. (PLMR) : Free Stock Analysis Report
