Over the past six months, Palomar Holdings has been a great trade, beating the S&P 500 by 10.4%. Its stock price has climbed to $130.05, representing a healthy 15.5% increase. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now still a good time to buy PLMR? Or are investors being too optimistic? Find out in our full research report, it’s free.
Why Is PLMR a Good Business?
Founded in 2013 to fill gaps in catastrophe insurance markets, Palomar Holdings (NASDAQ: PLMR) is a specialty insurance provider that offers property and casualty insurance products in underserved markets, with a focus on earthquake coverage.
1. Net Premiums Earned Skyrocket, Fueling Growth Opportunities
When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are therefore net of what’s ceded to reinsurers as a risk mitigation and transfer strategy.
Palomar Holdings’s net premiums earned has grown at a 52.3% annualized rate over the last two years, much better than the broader insurance industry and in line with its total revenue.
2. Growing BVPS Reflects Strong Asset Base
In the insurance industry, book value per share (BVPS) provides a clear picture of shareholder value, as it represents the total equity backing a company’s insurance operations and growth initiatives.
Palomar Holdings’s BVPS increased by 20.1% annually over the last five years, and growth has recently accelerated as BVPS grew at an incredible 36.7% annual clip over the past two years (from $19.02 to $35.54 per share).
3. Projected BVPS Growth Is Remarkable
The key to book value per share (BVPS) growth is an insurer’s ability to earn underwriting profits while generating strong returns on its float - Warren Buffet’s secret sauce.
Over the next 12 months, Consensus estimates call for Palomar Holdings’s BVPS to grow by 26% to $35.47, elite growth rate.
Final Judgment
These are just a few reasons why Palomar Holdings ranks near the top of our list, and with its shares outperforming the market lately, the stock trades at 3× forward P/B (or $130.05 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
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