Is Palomar Holdings Fairly Priced After Expansion Into New Specialty Insurance Lines?

• Ever wondered if Palomar Holdings’ latest rally means it is fairly valued, undervalued, or maybe even too expensive? Let’s take a closer look at what is really driving investor curiosity around this fast-rising insurance stock.
• Shares of Palomar Holdings have climbed 10.2% in the past month and are up 14.5% over the last year, with a surge of 101.0% over the last three years. This performance has placed it firmly on the radar of growth-focused investors.
• Recent headlines have highlighted Palomar’s expansion into new specialty insurance lines and partnerships with major reinsurers. These developments have helped fuel confidence in its long-term prospects and contributed to the stock’s positive price momentum. Investor interest also increased after the company’s launch of innovative catastrophe risk solutions, reflecting growing demand for its niche offerings.
• If you like to review the numbers, Palomar Holdings currently earns a 3 out of 6 valuation score based on standard metrics. This suggests there is more to consider. We will break down what these valuation models can reveal and suggest a smarter way to understand value before we wrap up.

Palomar Holdings delivered 14.5% returns over the last year. See how this stacks up to the rest of the Insurance industry.

Approach 1: Palomar Holdings Excess Returns Analysis

The Excess Returns valuation model focuses on how effectively Palomar Holdings is generating returns above its cost of equity. This is a key indicator of value creation for shareholders. By assessing return on equity (ROE) and growth in book value, this approach helps estimate the intrinsic worth of the business based on its ability to deliver consistent, above-average profitability.

For Palomar Holdings, the current Book Value is $33.14 per share, while the company’s long-term, stable Earnings Per Share (EPS) are estimated at $9.64, using projections from seven analysts. The cost of equity stands at $2.90 per share, resulting in an Excess Return of $6.74 per share. The average projected ROE is a robust 23.16%, suggesting Palomar efficiently reinvests capital. Looking ahead, analysts foresee a stable Book Value of $41.63 per share, supported by six separate estimates, indicating confidence in future growth.

Based on these calculations, the Excess Returns model estimates Palomar Holdings’ intrinsic value at a level implying the stock is currently 44.7% undervalued compared to its share price. This margin points to a potential opportunity for investors seeking undervalued growth stocks with strong return metrics.

Result: UNDERVALUED

Our Excess Returns analysis suggests Palomar Holdings is undervalued by 44.7%. Track this in your watchlist or portfolio, or discover 927 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Palomar Holdings.

Approach 2: Palomar Holdings Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used valuation metric for profitable companies like Palomar Holdings because it shows how much investors are willing to pay for each dollar of current earnings. A company's PE ratio can reflect both its expectations for future growth and the risk investors associate with its business model. Typically, stocks with higher projected growth rates or lower perceived risks trade at higher PE multiples.

Palomar Holdings’ current PE ratio is 18.7x. This compares to an insurance industry average of 13.2x and a peer group average of 15.8x, meaning Palomar trades at a premium relative to both benchmarks. However, to gain a clearer picture of what multiple the company actually deserves, Simply Wall St calculates a “Fair Ratio” based on a range of factors, such as expected earnings growth, profit margins, company size, and specific risks, rather than relying solely on an industry or peer comparison.

For Palomar Holdings, the Fair Ratio is 14.6x, which is notably lower than its current PE ratio. The advantage of using the Fair Ratio is that it focuses on the company's unique fundamentals and risks, instead of relying on simple averages that may overlook important details. Comparing Palomar's 18.7x to its 14.6x Fair Ratio suggests the stock is currently trading above what would be considered fair based on these tailored factors.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1439 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Palomar Holdings Narrative

Earlier, we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is more than numbers; it allows you to connect your perspective on a company like Palomar Holdings to a financial forecast and ultimately to what you believe is a fair value. On Simply Wall St’s Community page, Narratives make it easy for any investor to build and share a story behind their forecasts, using real-time data and dynamic updates whenever news, earnings, or sector trends change.

Instead of focusing only on PE ratios or industry averages, Narratives let you link the business’s unique drivers, such as expansion into new insurance lines, technological advantages, or exposure to catastrophe risks, directly to assumptions about future revenue, earnings, and margins. This helps you see whether your own estimate of Palomar’s Fair Value means the stock is attractive at today’s price, or suggests caution. Millions of investors use these tools to help them decide not just if they should buy or sell, but why.

For example, some investors may see Palomar’s resilient growth and assign a higher fair value of $165.33, while others remain cautious and estimate a lower fair value of $121.03. This illustrates how Narratives can reveal a range of informed opinions, all rooted in transparent reasoning.

Do you think there's more to the story for Palomar Holdings? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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