PLMR

Palomar is a high-quality specialty P&C compounder hiding in plain sight. The numbers are exceptional: FY2025 revenue grew 58.2% to $876M, net income jumped 67.6% to $197M, and diluted EPS rose 60% to $7.17. Operating cash flow of $409M (+56.7%) materially exceeds reported earnings, and capex is a rounding error ($137K) — this is a capital-light business converting underwriting profits to cash. The MD&A confirms the scale of the franchise: gross written premiums hit $2.0B in 2025, a ~55% CAGR from $16.6M at inception in 2014, and the company has been profitable every year since 2016 with a 46% net income CAGR over the same period. ROE of 20.9% on a $943M equity base is best-in-class for the industry.

Valuation is the surprise. At $118.88, PLMR trades at 16.6x trailing EPS and 3.6x sales — a market multiple for a business growing earnings 60%+. Even normalizing growth materially lower, the PEG is well under 1. The July 2025 $150M repurchase authorization (only $37.3M deployed in FY25) signals management views the stock as undervalued and provides a floor. Retained earnings grew 60.9% to $422M, showing the compounding flywheel is intact.