Palomar Holdings (NASDAQ:PLMR) shareholders YoY returns are lagging the company's 17% three-year earnings growth

Low-cost index funds make it easy to achieve average market returns. But in any diversified portfolio of stocks, you'll see some that fall short of the average. That's what has happened with the Palomar Holdings, Inc. (NASDAQ:PLMR) share price. It's up 18% over three years, but that is below the market return. Disappointingly, the share price is down 6.1% in the last year.

In light of the stock dropping 9.0% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive three-year return.

Check out our latest analysis for Palomar Holdings

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During three years of share price growth, Palomar Holdings achieved compound earnings per share growth of 62% per year. This EPS growth is higher than the 6% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Palomar Holdings has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

While it's never nice to take a loss, Palomar Holdings shareholders can take comfort that their trailing twelve month loss of 6.1% wasn't as bad as the market loss of around -8.3%. Longer term investors wouldn't be so upset, since they would have made 6%, each year, over three years. Given the three year returns are better than the return over the last year, it might be that the broader market has weighed on the stock recently. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

But note: Palomar Holdings may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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