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Palomar (PLMR) Stock Gains 18.9% YTD: More Room for Growth?
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Shares of Palomar Holdings, Inc. (PLMR - Free Report) have gained 18.9% year to date, outperforming the industry's growth of 13.9%. The Zacks S&P 500 composite has increased 15.9% in the said time frame. With a market capitalization of $1.3 billion, the average volume of shares traded in the last three months was 0.1 million.
Image Source: Zacks Investment Research
The rally was driven mainly by strong premium retention rates for an existing business, higher yields on invested assets, the expansion of its regional footprint and favorable growth estimates.
This Zacks Rank #2 (Buy) insurer has a solid track record of beating earnings estimates in six of the last seven quarters while missing in one.
Palomar’s return on equity is 17.1%, which compares favorably with the industry’s average of 6.7% and expanded 220 basis points year over year.
Can PLMR Stock Retain the Momentum?
The Zacks Consensus Estimate for Palomar’s 2023 earnings is pegged at $3.38 per share, indicating a 22% increase from the year-ago reported figure on 11.1% higher revenues of $372.03 million. The consensus estimate for 2024 earnings is pegged at $3.95 per share, indicating a 17% increase from the year-ago reported figure on 24.1% higher revenues of $461.95 million.
Palomar’s premium growth is likely to gain from a higher volume of policies written across lines of business, strong premium retention rates for an existing business, the expansion of products’ geographic footprint and new partnerships.
Investment income witnessed a five-year CAGR (2017-2022) of 36.7%. Higher yields on invested assets, high-quality fixed-income securities, improved average balance of investments and an increase in fixed-income yields should help PLMR retain the momentum.
The insurer’s revenues have increased at a five-year CAGR (2017-2022) of 32.9% on the back of higher premiums, net investment income and commission and other income. High premium retention and strong renewal rates are likely to help retain the momentum going forward.
For 2023, the company projects to generate adjusted net income between $89 million and $93 million.
The P&C insurer’s Earthquake business should benefit as the ongoing dislocation in the earthquake market acts as a tailwind. Palomar would capitalize on this opportunity to grow and optimize its book of business. Inland Marine business of PLMR should gain from rate increases and an expansion of its distributional and regional footprint. Excess Property Line will continue to be the core of the insurer’s strategy of maximizing profit margins.
A solid capital position enables Palomar to enhance shareholder value via share buybacks. The insurer’s growing cash and cash equivalents indicate sufficient cash reserves to ensure financial stability. With respect to share buybacks, $50 million remained under authorization as of Jun 30, 2023.
Palomar remains committed to protecting its earnings through its current reinsurance program. The company completed the renewal of certain reinsurance programs, beginning Jun 1, 2023, of $188 million for the earthquake business. This move will also reduce earnings volatility in the future. PLMR can also take advantage of additional growth opportunities, given its low-risk profile due to the risk transfer arrangement.
The Zacks Consensus Estimate for 2023 and 2024 has moved 1.8% and 1% north, respectively, in the past 60 days. This should instill investors' confidence in the stock.
Other Stocks to Consider
Some other top-ranked stocks from the property and casualty insurance industry are Arch Capital Group Ltd. (ACGL - Free Report) , Axis Capital Holdings Limited (AXS - Free Report) and Cincinnati Financial Corporation (CINF - Free Report) . While Arch Capital and Axis Capital sport a Zacks Rank #1 (Strong Buy) each, Cincinnati Financial carries a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arch Capital has a decent history of delivering earnings surprises in each of the last four quarters, the average being 26.83%. In Year to date, ACGL has rallied 29.3%.
The Zacks Consensus Estimate for ACGL’s 2023 and 2024 earnings has moved 7.6% and 6.5% north, respectively, in the past 60 days, reflecting analysts’ optimism.
Axis Capital has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 9.75%. Year to date, AXS has gained 6.8%.
The Zacks Consensus Estimate for AXS’ 2023 and 2024 earnings per share is pegged at $8.41 and $9.31, indicating a year-over-year increase of 44.7% and 10.7%, respectively.
Cincinnati Financial has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 25.25%. Year to date, CINF has gained 6.5%.
The Zacks Consensus Estimate for CINF’s 2023 and 2024 earnings per share is pegged at $5 and $5.88, indicating a year-over-year increase of 17.9% and 17.6%, respectively.
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Palomar (PLMR) Stock Gains 18.9% YTD: More Room for Growth?
Shares of Palomar Holdings, Inc. (PLMR - Free Report) have gained 18.9% year to date, outperforming the industry's growth of 13.9%. The Zacks S&P 500 composite has increased 15.9% in the said time frame. With a market capitalization of $1.3 billion, the average volume of shares traded in the last three months was 0.1 million.
Image Source: Zacks Investment Research
The rally was driven mainly by strong premium retention rates for an existing business, higher yields on invested assets, the expansion of its regional footprint and favorable growth estimates.
This Zacks Rank #2 (Buy) insurer has a solid track record of beating earnings estimates in six of the last seven quarters while missing in one.
Palomar’s return on equity is 17.1%, which compares favorably with the industry’s average of 6.7% and expanded 220 basis points year over year.
Can PLMR Stock Retain the Momentum?
The Zacks Consensus Estimate for Palomar’s 2023 earnings is pegged at $3.38 per share, indicating a 22% increase from the year-ago reported figure on 11.1% higher revenues of $372.03 million. The consensus estimate for 2024 earnings is pegged at $3.95 per share, indicating a 17% increase from the year-ago reported figure on 24.1% higher revenues of $461.95 million.
Palomar’s premium growth is likely to gain from a higher volume of policies written across lines of business, strong premium retention rates for an existing business, the expansion of products’ geographic footprint and new partnerships.
Investment income witnessed a five-year CAGR (2017-2022) of 36.7%. Higher yields on invested assets, high-quality fixed-income securities, improved average balance of investments and an increase in fixed-income yields should help PLMR retain the momentum.
The insurer’s revenues have increased at a five-year CAGR (2017-2022) of 32.9% on the back of higher premiums, net investment income and commission and other income. High premium retention and strong renewal rates are likely to help retain the momentum going forward.
For 2023, the company projects to generate adjusted net income between $89 million and $93 million.
The P&C insurer’s Earthquake business should benefit as the ongoing dislocation in the earthquake market acts as a tailwind. Palomar would capitalize on this opportunity to grow and optimize its book of business. Inland Marine business of PLMR should gain from rate increases and an expansion of its distributional and regional footprint. Excess Property Line will continue to be the core of the insurer’s strategy of maximizing profit margins.
A solid capital position enables Palomar to enhance shareholder value via share buybacks. The insurer’s growing cash and cash equivalents indicate sufficient cash reserves to ensure financial stability. With respect to share buybacks, $50 million remained under authorization as of Jun 30, 2023.
Palomar remains committed to protecting its earnings through its current reinsurance program. The company completed the renewal of certain reinsurance programs, beginning Jun 1, 2023, of $188 million for the earthquake business. This move will also reduce earnings volatility in the future. PLMR can also take advantage of additional growth opportunities, given its low-risk profile due to the risk transfer arrangement.
The Zacks Consensus Estimate for 2023 and 2024 has moved 1.8% and 1% north, respectively, in the past 60 days. This should instill investors' confidence in the stock.
Other Stocks to Consider
Some other top-ranked stocks from the property and casualty insurance industry are Arch Capital Group Ltd. (ACGL - Free Report) , Axis Capital Holdings Limited (AXS - Free Report) and Cincinnati Financial Corporation (CINF - Free Report) . While Arch Capital and Axis Capital sport a Zacks Rank #1 (Strong Buy) each, Cincinnati Financial carries a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arch Capital has a decent history of delivering earnings surprises in each of the last four quarters, the average being 26.83%. In Year to date, ACGL has rallied 29.3%.
The Zacks Consensus Estimate for ACGL’s 2023 and 2024 earnings has moved 7.6% and 6.5% north, respectively, in the past 60 days, reflecting analysts’ optimism.
Axis Capital has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 9.75%. Year to date, AXS has gained 6.8%.
The Zacks Consensus Estimate for AXS’ 2023 and 2024 earnings per share is pegged at $8.41 and $9.31, indicating a year-over-year increase of 44.7% and 10.7%, respectively.
Cincinnati Financial has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 25.25%. Year to date, CINF has gained 6.5%.
The Zacks Consensus Estimate for CINF’s 2023 and 2024 earnings per share is pegged at $5 and $5.88, indicating a year-over-year increase of 17.9% and 17.6%, respectively.