Discounted Cash Flow Calculation for NasdaqGS:PLMR using Excess Returns Model Model
The calculations below outline how an intrinsic value for Palomar Holdings is arrived at using the Excess Return Model. This approach is used for finance firms where free cash flow is difficult to estimate.
In the Excess Return Model the value of a firm can be written as the sum of capital invested currently in the firm and the present value of excess returns that the firm expects to make in the future.
The model is sensitive to the Return on Equity of the company versus the Cost of Equity, how these are calculated is detailed below the main calculation.
Amount off the current price
is available for.
Share price is
vs Future cash flow value of
Current Discount Checks
to be considered undervalued it must be available for at least 20% below the
current price. Less than 40% is even better.
Palomar Holdings's share price is below the future cash flow value, and at a moderate discount (> 20%).
Palomar Holdings's share price is below the future cash flow value, and at a substantial discount (> 40%).
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for
it. This is similar to the price of fruit (e.g. Mangoes or Avocados) increasing
when they are out of season, or how much your home is worth.
The amount the stock market is willing to pay for
is considered below, and whether this is a fair price.
Price based on past earnings
Palomar Holdings's earnings available for a low price, and how does
this compare to other companies in the same industry?
Palomar Holdings's earnings are expected to grow significantly at over 20% yearly.
Palomar Holdings's revenue is expected to grow significantly at over 20% yearly.
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can
be gauged below. We look back 3 years and see if they were any good at
predicting what actually occurred. We also show the highest and lowest estimates
looking forward to see if there is a wide range.
Palomar Holdings's performance over the past 5 years by checking for:
Has earnings increased in past 5 years? (1 check)
Has the earnings growth in the last year exceeded that of the
industry? (1 check)
Is the recent earnings growth over the last year higher than the average annual growth over the
past 5 years? (1 check)
Is the Return on Equity (ROE) higher than 20%? (1 check)
Is the Return on Assets (ROA) above industry average? (1 check)
Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent
earnings report. Some checks require at least 3 or 5 years worth of data.
has a total score of
1/6, see the detailed checks below.
Note: We use GAAP Net Income excluding extraordinary items in all our calculations.
A company's financial position is much like your own financial position,
it includes everything you own
The boxes below represent the relative size of what makes up
Palomar Holdings's finances.
The net worth of a company is the difference between its assets and liabilities.
Palomar Holdings's short term (1 year) commitments are greater than its holdings of cash and other short term assets.
Palomar Holdings's cash and other short term assets cover its long term commitments.
This treemap shows a more detailed breakdown of
Palomar Holdings's finances. If any of them are yellow this
indicates they may be out of proportion and red means they relate to one of the
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
Low level of unsold assets.
Debt is covered by short term assets, assets are 2.7x debt.
Nearly all companies have debt. Debt in itself isn’t
however if the debt is too high, or the company can’t afford to pay the interest
on its debts this may have impacts in the future.
The graphic below shows equity (available funds) and debt, we ideally want to
see the red area (debt) decreasing.
If there is any debt we look at the companies capability to repay it, and
whether the level has increased over the past 5 years.
Management is one of the most important areas of a company. We look at
unreasonable CEO compensation, how long the team and board of directors have
been around for and insider trading.
TENURE AS CEO
Mr. David McDonald Armstrong, also known as Mac, is Founder, Chairman and Chief Executive Officer at Palomar Insurance Holdings, Inc. He Founded Palomar Specialty Insurance Company in 1963 and serves as its Chief Executive Officer and Chairman of the Board. Mr. Armstrong served as the President at Arrowhead General Insurance Agency, Inc. Mr. Armstrong served as Chief Financial Officer, Chief Operating Officer and Executive Vice President of Arrowhead General Insurance Agency, Inc. He served as a Principal at Spectrum Equity Management, L.P. (also known as Spectrum Equity Investors), Spectrum Equity Investors V, L.P. and Spectrum Equity Investors IV, L.P. He joined Spectrum Equity Investors in March 2000 and worked from its Menlo Park office. Mr. Armstrong has been involved with Spectrum Equity Investors’ investments in AMC Entertainment Inc., Arrowhead General Insurance Agency, Inc., CBD Media LLC, Nassau Broadcasting Partners, LP, QTC Management, Inc., RJ 0'Brien & Associates, Apprise Media, LLC, Loews Cineplex Entertainment, Network Telephone, Arrowhead Group, and Paytrust. He served as a Manager of Business Development at Evant, Inc. or Nonstop Solutions Inc., where Mr. Armstrong focused on strategic and corporate development. He was also a Financial Analyst in the Media, Communications, and Technology Group of Deutsche Bank Alex. Brown Inc. (also known as BT Alex Brown & Sons), where Mr. Armstrong worked on mergers and acquisitions and both public and private equity offerings. He has been a Director at Arrowhead General Insurance Agency, Inc. and American Claims Management, Inc., Apprise Media LLC and Nassau Broadcasting Partners, L.P. He served as Director of QTC Management, Inc. Mr. Armstrong is a member of the San Diego Chapter of the Young President’ Organization (“YPO”) and is a member of the Board of Trustees of the Gillispie School. He earned an A.B. degree in History from Princeton University. He is Co-Founder of Palomar Holdings, Inc. and has been its Chief Executive Officer and Director since February 2014.
Insufficient data for Mac to compare compensation growth.
Mac's remuneration is lower than average for companies of similar size in United States of America.
Management Team Tenure
Average tenure and age of the
management team in years:
The average tenure for the Palomar Holdings management team is over 5 years, this suggests they are a seasoned and experienced team.
Co-Founder & President
Chief Operating Officer
CFO & Corporate Secretary
Chief Underwriting Officer
Board of Directors Tenure
Average tenure and age of the
board of directors in years:
The average tenure for the Palomar Holdings board of directors is less than 3 years, this suggests a new board.
Palomar Holdings, Inc. provides specialty property insurance. The company offers personal and commercial specialty property insurance products, including residential and commercial earthquake, specialty homeowners, commercial all-risk, hawaii hurricane, residential flood, and real estate investor. Palomar Holdings, Inc. was formerly known as GC Palomar Holdings. The company was incorporated in 2013 and is based in La Jolla, California. Palomar Holdings, Inc. is a subsidiary of Genstar Capital.
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