Palomar Holdings Stock Surges 86.8% YTD: Will the Rally Last?

Palomar Holdings, Inc. PLMR shares have rallied 86.8% year to date (YTD) compared with the industry's growth of 31.5%. The Finance sector and the Zacks S&P 500 composite have returned 21.3% and 23.4%, respectively, YTD. With a market capitalization of $2.74 billion, the average volume of shares traded in the last three months was 0.15 million.PLMR Outperforms Industry, Sector, S&P YTDImage Source: Zacks Investment ResearchShares of PLMR closed at $103.69 on Friday, near its 52-week high of $107.00. This proximity underscores investor confidence. It has the ingredients for further price appreciation.This property and casualty insurer has a solid track record of beating earnings estimates in each of the last four quarters, the average being 14.90%.New business, strong premium retention rates for existing business and renewals of existing policies, better pricing and effective capital deployment are driving shares higher.PLMR Trading Above 50-Day and 200-Day Moving AverageThis Zacks Rank #3 (Hold) property and casualty insurer is trading above its 50-day and 200-day simple moving average (SMA) of $95.77 and $85.82, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.Palomar Holdings’ Growth Projection EncouragesThe Zacks Consensus Estimate for Palomar Holdings’ 2024 earnings per share indicates a year-over-year increase of 29.8%. The consensus estimate for revenues is pegged at $537.83 million, implying a year-over-year improvement of 44.2%. The consensus estimate for 2025 earnings per share and revenues indicates a year-over-year increase of 23.1% and 26.8%, respectively, from the corresponding 2024 estimates. PLMR has an impressive Growth Score of A. This style score helps analyze the growth prospects of a company.PLMR’s Return on CapitalReturn on equity (ROE) is a measure of profitability reflecting how efficiently the company is utilizing its shareholders’ value. ROE was 20.8% in the first half of 2024, which compared favorably with the industry’s average of 7.5% and expanded 370 basis points year over year. Annualized adjusted return on equity was 20.9% in the first nine months of 2024. Also, return on invested capital in the trailing 12 months was 18.5%, better than the industry average of 5.7%, reflecting the company’s efficiency in utilizing funds to generate income.Factors Acting in Favor of PLMRPremiums, 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%. 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 $124 million and $128 million in 2024. This range includes catastrophe losses incurred during the fourth quarter of 2024 of nearly $8 million related to Hurricane Milton.The Zacks Consensus Estimate for Palomar Holdings’ 2025 earnings has moved 0.6% north, respectively, in the past 30 days, reflecting analyst optimism.Key PicksInvestors interested in the property and casualty insurance industry may look at some better-ranked players like First American Financial Corporation FAF, Mercury General Corporation MCY and The Travelers Companies, Inc. TRV. While First American and Mercury General sport a Zacks Rank #1 (Strong Buy) each, The Travelers carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for First American’s 2024 and 2025 earnings indicates 5% and 32.1% year-over-year growth, respectively. In the year-to-date period, shares of FAF have gained 0.6%.The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 2.5% and 4.3% north, respectively, in the past 30 days.Mercury General's bottom line outpaced estimates in each of the trailing four quarters, the average surprise being 694.28%. In the year-to-date period, shares of MCY have rallied 96.7%.The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 2,016.67% and 8.66% north, respectively, in the past 30 days.The Travelers' bottom line outpaced estimates in three of the trailing four quarters and missed in one, the average surprise being 25.40%. In the year-to-date period, shares of TRV have gained 34.6%.The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 9.1% and 1.2% north, respectively, in the past 30 days, reflecting analysts’ optimism.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 228 positions with double- and triple-digit gains in 2023 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The Travelers Companies, Inc. (TRV): Free Stock Analysis Report First American Financial Corporation (FAF): Free Stock Analysis Report Mercury General Corporation (MCY): Free Stock Analysis Report Palomar Holdings, Inc. (PLMR): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks