PLMR Stock Study (6-8-26)

I recently did a stock study on Palomar Holdings, Inc. (PLMR, $108.51).

M* writes:

     > Palomar Holdings Inc… provides property and casualty
     > insurance products to individuals and businesses. It provides
     > insurance products serving five categories: Earthquake,
     > Inland Marine and Other Property, Casualty, Fronting, and
     > Crop. Company distribute products through multiple channels,
     > including retail agents, program administrators, wholesale
     > brokers, and partnerships with other insurance companies.
     > The company’s Earthquake product generate high premium.

Since public trading begins in 2019, this small-size company grows sales and earnings 37.6% and 67.7% per year, respectively. Lines are mostly up, straight, and parallel except for YOY EPS decline in ’20. Seven-year R^2 is 0.85. Shares outstanding increase 26.1% (3.9%/year).

Since 2019, PTPM leads peer and industry averages while increasing from 14.7% to 28.9% (’25) with a last-5-year mean of 25.5%. ROE leads peer averages but trails the industry despite increasing from 5.5% to 21.7% (’25) with a last-5-year mean of 16.5% (shareholder equity consistently positive with 27.6% CAGR). Debt-to-Capital is less than peer and industry averages with a last-5-year mean of only 3.7%.

Interest coverage is 74.1 per M* who assigns “Narrow” Economic Moat but gives a C grade for Financial Health (per BetterInvesting® website). Value Line (VL) reports no long-term debt.

With regard to sales growth:

• YF gives YOY ACE 45.5% and 25.5% for ’26 and ’27, respectively (based on 4 analysts).
• Zacks gives YOY ACE 45.4% and 20.0% for ’26 and ’27 (3 analysts).
• CFRA gives ACE 45.5% YOY and 34.5% per year for ’26 and ’25-’27, respectively (4).

My 15.0% forecast is below the short-term estimate range (no long-term estimates available).

With regard to EPS growth:

• MarketWatch gives ACE 19.6% and 16.5% per year for ’25-’27 and ’25-’28, respectively (based on 9 analysts).
• Nasdaq.com gives ACE 13.2% YOY and 9.1% per year for ’27 and ’26-’28 (6 / 5 / 2 analysts for ’26 / ’27 / ’28).
• Finviz gives 5-year annualized ACE of 15.9% (3).
• YF gives YOY ACE 25.6% and 13.2% for ’26 and ’27, respectively (6).
• Zacks gives YOY ACE 25.3% and 11.8% for ’26 and ’27, respectively (5).
• VL gives ACE 25.1% YOY (5) and 20.7% per year from ’25-’27 (4).
• CFRA gives ACE 37.8% YOY and 24.9% per year for ’26 and ’25-’27 (6).

My 12.0% forecast discounts the only long-term estimate by ~25%. Initial value is ’25 EPS of $7.17/share.

My Forecast High P/E is 18.0. Since 2019, high P/E decreases (excluding 508 outlier in ’20) from 116 to 24.5 (’25) with last-5-year mean of 36.6 and a last-5-year-mean average P/E of 27.9. I am below the range.

My Forecast Low P/E is 12.0. Since 2019, low P/E decreases (excluding 163 outlier in ’20) from 36.9 to 13.7 (’25) with a last-5-year mean of 19.2. I am forecasting below the range.

My Low Stock Price Forecast (LSPF) of $86.00 is default based on initial value from above: 20.7% less than previous close and 14.7% less than the 52-week low.

These inputs land PLMR in the BUY zone with a U/D ratio of 5.3. Total Annualized Return (TAR) is 15.9%.

PAR (using Forecast Average—not High—P/E) of 11.8% is less than I seek for a small-size company. If a healthy margin of safety (MOS) anchors the study, then I can proceed based on TAR instead.

To assess MOS, I start by comparing my inputs with those of Member Sentiment (MS). Based on 135 studies done in the past 90 days (my study and 42 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 16.9%, 15.0%, 23.0, and 15.0, respectively. I am lower on each.

MS high / low EPS are $14.44 / $7.17 versus my $12.64 / $7.17 (per share). My high EPS is less due to a lower growth rate.

MS LSPF of $91.10 implies a Forecast Low P/E of 12.7: less than the above-stated 15.0. MS LSPF is 15.3% less than the default $7.17/share * 15.0 = $107.55 resulting in more conservative zoning. MS LSPF is 5.9% greater than mine, however.

MOS is robust in the study because my inputs are less than all historical/analyst/MS averages/ranges. MS TAR exceeding mine by 7.9% supports the assessment along with my lower LSPF.

With regard to valuation, PEG is 0.2 (lowest I have ever seen?) and 1.1 per M* and my projected P/E: undervalued. Relative Value [(current P/E) / 5-year-mean average P/E] is quite low at 0.54. M* reports the stock at a 21% discount.

Per U/D, PLMR is a BUY right now under $121/share. Given a forecast high price ~$228, the BetterInvesting® TAR criterion is met [227.5 / ((14.87 / 100 ) +1 ) ^ 5] ~ $114 (no dividend).

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