With EPS Growth And More, Palomar Holdings (NASDAQ:PLMR) Makes An Interesting Case

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Palomar Holdings (NASDAQ:PLMR). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Palomar Holdings with the means to add long-term value to shareholders.

We've discovered 1 warning sign about Palomar Holdings. View them for free.

How Quickly Is Palomar Holdings Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Impressively, Palomar Holdings has grown EPS by 35% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. While we note Palomar Holdings achieved similar EBIT margins to last year, revenue grew by a solid 47% to US$554m. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

View our latest analysis for Palomar Holdings

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Palomar Holdings' future profits.

Are Palomar Holdings Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Palomar Holdings insiders have a significant amount of capital invested in the stock. Given insiders own a significant chunk of shares, currently valued at US$96m, they have plenty of motivation to push the business to succeed. This should keep them focused on creating long term value for shareholders.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Our quick analysis into CEO remuneration would seem to indicate they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Palomar Holdings with market caps between US$2.0b and US$6.4b is about US$7.5m.

Palomar Holdings' CEO took home a total compensation package worth US$5.5m in the year leading up to December 2024. That is actually below the median for CEO's of similarly sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Should You Add Palomar Holdings To Your Watchlist?

You can't deny that Palomar Holdings has grown its earnings per share at a very impressive rate. That's attractive. If you still have your doubts, remember too that company insiders have a considerable investment aligning themselves with the shareholders and CEO pay is quite modest compared to similarly sized companiess. This may only be a fast rundown, but the key takeaway is that Palomar Holdings is worth keeping an eye on. It is worth noting though that we have found 1 warning sign for Palomar Holdings that you need to take into consideration.

Although Palomar Holdings certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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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.