PLMR

Palomar Holdings, Inc. holds a top-quartile position (#0 of 50) within the Finance, Insurance, And Real Estate sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 39.9/100 places it at rank #3547 in our full 7,333-stock universe. At $3.1B in market capitalization, Palomar Holdings, Inc. is a mid-cap player in the Finance, Insurance, And Real Estate space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue is growing at 87%, though momentum at the 37th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 0% (-76.5pp vs sector) narrow to operating margins of 28% (+11.4pp vs sector) and net margins of 22.3%, yielding a gross-to-net conversion rate of N/A%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

We assign Palomar Holdings, Inc. a Narrow Moat rating with a composite moat score of 53/100. The company possesses identifiable competitive advantages, though they are less entrenched than those of wide-moat peers. Our analysis indicates that Palomar Holdings, Inc. can sustain above-average returns on invested capital for at least 10 years, with the strongest contributor being growth durability at 15.8/20.

The strongest moat sources are growth durability (15.8/20) and financial resilience (15/20). Rev growth 87%, 7yr history. Interest coverage 504.8x, Net debt/EBITDA -1.7x. These pillars form the core of Palomar Holdings, Inc.'s competitive identity and are the primary drivers of excess returns in our framework.

Areas of relative weakness include reinvestment efficiency (0/20) and margin superiority (8.2/20). Capital turnover N/A. Improvement in these areas could meaningfully widen the moat over time, while deterioration would be an early warning of competitive erosion.

Our moat trend assessment is Stable. Multi-year ROIC and operating margin trajectories show neither meaningful improvement nor deterioration, suggesting the competitive position is steady. We expect Palomar Holdings, Inc.'s moat profile to remain largely unchanged absent a material shift in return on capital or industry dynamics.

At a current price of $120.90, Palomar Holdings, Inc. is trading near fair value based on current fundamentals. Our value factor score of 47/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 18.7x (a 56% premium to the sector median of 11.9x), EV/EBITDA of 14.6x (at a premium), P/B of 3.6x, P/S of 4.2x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

Key profit drivers include operating margins of 28% reflecting effective cost management, robust top-line growth of 87% expanding the revenue base, returns on equity of 19.5% driving shareholder value creation. The margin cascade from 0% gross to 28% operating to 22.3% net reveals the company's cost structure and reinvestment intensity. Our analysis indicates that profit quality raises some durability concerns, with the quality factor at the 31th percentile.

The margin profile shows gross margins of 0%, operating margins of 28%, net margins of 22.3%. Return metrics include ROE of 19.5% and ROA of 5.8%. Relative to the Finance, Insurance, And Real Estate sector, gross margins are 76.5 percentage points below the sector median of 77%, and ROE of 19.5% compares to a sector median of 8.9%.

The balance sheet reflects high leverage with D/E of 235%, which may limit financial flexibility, revenue growth of 87%. The sector median D/E is 0%, putting Palomar Holdings, Inc. at higher leverage than the typical peer. Elevated leverage in combination with the current margin profile warrants close monitoring for any deterioration in debt-servicing capacity.

We assign a High uncertainty rating to Palomar Holdings, Inc.. Key risk factors include significant leverage (235% debt-to-equity), below-average price stability (37th percentile), weak quality scores (31th percentile). The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: significant leverage (235% debt-to-equity); below-average price stability (37th percentile); weak quality scores (31th percentile); low beta of 0.62 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 37th percentile and quality factor at the 31th percentile provide a quantitative summary of the overall risk landscape.

We identify limited risk mitigants at this time, which contributes to our high uncertainty assessment. Investors should monitor for improvement in balance sheet metrics, margin stability, and business predictability that could warrant a downgrade in our risk assessment over time.

We rate Palomar Holdings, Inc.'s capital allocation as Poor. Key concerns include elevated leverage (235% D/E). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Palomar Holdings, Inc. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Palomar Holdings, Inc. receives a Avoid rating with a composite score of 39.9/100 (rank #3547 of 7,333). Our quantitative framework assigns a Narrow Moat (53/100, trend: stable), High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 35/100.

Our analysis does not support a constructive view on Palomar Holdings, Inc. at this time. The combination of the current quantitative profile, high uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.