Should You Take a Closer Look at Palomar After Its Latest 12% Price Rally?

Thinking about whether Palomar Holdings is worth a closer look? If you want to see if exceptional returns can still mean fair value, you are in the right place. Palomar’s stock has been on a run, surging 12.3% this week, up 8.5% over the past month, and delivering a notable 27.9% return over the last year. Clearly, something is getting investors’ attention. Recent news coverage has highlighted Palomar’s innovative approach to specialty insurance, with particular focus on its tailored products in response to shifting climate risks. These headlines have helped feed positive sentiment and may explain the pace of the latest price moves. On our valuation checklist, Palomar scores a 3/6 for being undervalued. This is a decent start, but there is more to the story than any single approach can tell. Next, we will dig into how analysts and models value the stock, and point you toward what might actually be the best way to judge if Palomar is worth your investment.

Palomar Holdings delivered 27.9% 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 assesses a company by estimating how much profit it can generate above its cost of capital, using measures such as book value and consistent earnings power. This approach focuses on how efficiently Palomar Holdings reinvests its equity and how well it generates returns in excess of what investors require.

Palomar Holdings has an average return on equity of 22.92%, which is exceptionally strong compared to the broader insurance industry. The company’s current book value stands at $33.14 per share and is projected to grow to $41.76 per share, according to estimates from six analysts. Stable earnings per share are predicted at $9.57, with the cost of equity calculated at $2.90 per share. As a result, the model projects an "excess return" of $6.67 per share, indicating the amount by which Palomar’s profitability is expected to outpace its capital costs in the long run.

Based on this analysis, the intrinsic value per share is estimated at $222.14. Since Palomar Holdings is trading at a price that reflects a 42.4% discount to this value, the stock currently appears significantly undervalued using this methodology.

Result: UNDERVALUED

Our Excess Returns analysis suggests Palomar Holdings is undervalued by 42.4%. Track this in your watchlist or portfolio, or discover 875 more undervalued stocks based on cash flows.PLMR Discounted Cash Flow as at Nov 2025

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

Story Continues

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 directly relates a company’s share price to its per-share earnings. For businesses that consistently generate profits, the PE ratio provides investors with a straightforward gauge of how much they are paying for each dollar of earnings. This makes it an effective tool for quick comparison across the industry.

It is important to remember that what constitutes a “normal” or “fair” PE ratio depends on several factors, including expected earnings growth and the risk profile of the company. Faster-growing or less risky companies often command higher PE multiples, while those with slower growth or higher risk tend to trade at lower levels.

Currently, Palomar Holdings is trading at a PE ratio of 19.3x. For context, the average PE ratio among its insurance peers is 15.3x, while the broader industry average sits even lower at 13.2x. However, relying solely on these benchmarks can be misleading because they do not factor in Palomar's unique strengths and circumstances.

This is where Simply Wall St’s proprietary “Fair Ratio” comes in, offering a tailored benchmark, in this case 14.9x, that accounts for factors such as Palomar Holdings’ earnings growth, industry, profit margins, market cap, and risk profile. Unlike blunt peer or industry averages, the Fair Ratio provides a more nuanced and relevant signal for valuation relative to the company’s fundamentals.

Comparing Palomar’s actual PE of 19.3x with the Fair Ratio of 14.9x, the stock appears to be trading somewhat above its fair value using this lens.

Result: OVERVALUEDNasdaqGS:PLMR PE Ratio as at Nov 2025

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1404 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Palomar Holdings Narrative

Earlier we mentioned that there's an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a simple, flexible tool that lets you attach your personal story, assumptions, and reasoning behind a company, such as your fair value estimate and forecasts for Palomar Holdings’ future revenue, earnings, and margin, to the hard numbers. Narratives connect the dots between what’s happening in the business, your financial models, and ultimately the fair value you believe is justified. This helps you clearly see whether to buy or sell by comparing that value to today’s market price.

Available on Simply Wall St’s Community page and used by millions of investors, Narratives make it easy to share your perspective, see others’ forecasts, and learn how new events or earnings dynamically update the story. For Palomar Holdings, one Narrative predicts a fair value as high as $165.33 based on strong premium growth and tech-driven margin expansion, while another sees fair value as low as $134, highlighting sector headwinds and slower insurance growth. Narratives empower you to decide which perspective fits your outlook best, giving you more confidence and clarity in every investment decision.

Do you think there's more to the story for Palomar Holdings? Head over to our Community to see what others are saying!NasdaqGS:PLMR Community Fair Values as at Nov 2025

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.

Companies discussed in this article include PLMR.

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