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

Shares of Palomar Holdings, Inc. PLMR have gained 85.4% in the past year, outperforming its industry, the Finance sector and the Zacks S&P 500 composite’s growth of 19.5%, 20.9% and 12.5%, respectively. 

The insurer has a market capitalization of $4.12 billion. The average volume of shares traded in the last three months was 0.3 million.

Shares of Palomar Holdings closed at $154.25 on Monday and are trading above the 200-day simple moving average of $122.68, indicating solid upward momentum.

PLMR Shares are Expensive

Its shares are trading at a premium to the Zacks Property and Casualty Insurance industry. Its price-to-book value of 5.22X is higher than the industry average of 1.57X.

Shares of other insurers like The Allstate Corporation ALL, Arch Capital Group Ltd. ACGL and The Progressive Corporation PGR are also trading at a multiple higher than the industry average.

PLMR’s Encouraging Growth Projection

The Zacks Consensus Estimate for Palomar Holdings’ 2025 earnings per share indicates a year-over-year increase of 39.2%. The consensus estimate for revenues is pegged at $782.98 million, implying a year-over-year improvement of 42.5%. The consensus estimate for 2026 earnings per share and revenues indicates an increase of 17% and 26.3%, respectively, from the corresponding 2025 estimates.
PLMR has an impressive Growth Score of B. This style score helps analyze the growth prospects of a company.

Optimist Analyst Sentiment on PLMR

Four of the six analysts covering the stock have raised estimates for 2025, and three of the five analysts have raised the same for 2026 over the past 30 days. Thus, the Zacks Consensus Estimate for 2025 and 2026 earnings has moved up 2% and 1.5%, respectively, in the past 30 days.

Average Target Price for PLMR Suggests Upside

Based on short-term price targets offered by six analysts, the Zacks average price target is $183 per share. The average suggests a potential 19.31% upside from the last closing price.

PLMR’s Return on Capital

Return on equity is a measure of profitability reflecting how efficiently the company is utilizing its shareholders’ value. Return on equity of 20.5% compared favorably with the industry’s average of 7.8%. 

Also, the return on invested capital in the trailing 12-months was 19.9%, better than the industry average of 5.9%, reflecting the company’s efficiency in utilizing funds to generate income.

Factors Driving PLMR

Palomar’s fee-based platform, PLMR-FRONT, is positioned to drive medium-term growth. The addition of this revenue stream is expected to strengthen its earnings foundation.

The increasing volume of policies across multiple business lines, strong retention rates, expansion into new geographic areas and distribution channels, and the formation of new partnerships are expected to drive premiums. Palomar also projects that crop insurance will contribute around $200 million in premiums by 2025.

PLMR identifies Surety as an attractive, long-term growth opportunity. Like crop insurance, Surety is not correlated with the traditional property and casualty insurance cycle, offering diversification and stability.

Net investment income is expected to rise, supported by a high-quality fixed-income portfolio, higher average investment balances, and improved yields. This solid investment base is poised to generate strong returns.

Palomar’s risk transfer strategy reduces exposure to major catastrophic events, helping to stabilize earnings and improve its combined ratio.

Financially, the insurer maintains a strong capital position and a debt-free balance sheet. As part of its shareholder return initiatives, Palomar continues to execute share buybacks.

With these strengths in place, Palomar raised adjusted net income guidance to a range of $186-$200 million in 2025, which includes $8-$12 million of additional catastrophe losses.

Final Take on PLMR

Palomar is positioning itself as a key player in the crop insurance sector, with its growing emphasis on Surety signaling strong prospects for future expansion. The company’s diverse product suite, ongoing geographic growth, onboarding of new producers, strategic partnerships with other insurers, and implemented rate increases are all poised to fuel its momentum.

As a specialty insurer, Palomar leverages reinsurance to effectively mitigate risk exposure. This strategy enables the company to underwrite policies with sufficient coverage while managing potential losses, contributing to a stable and resilient business model.

Given its strong fundamentals and growth potential, this Zacks Rank #1 (Strong Buy) stock, despite its premium valuation, appears to be a compelling investment. You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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