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ProAssurance Corporation (PRA) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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ProAssurance Corporation (PRA)

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Intrinsic Value (DCF)

Current$24.20
→
Intrinsic$28.80
+19%
$17.20$28.80$50.82
Market implies 22% growth for 5 years
PRA shows 19% potential upside using 25% growth — reasonable if fundamentals hold.
At $24, the market prices in continued strong cash flow growth (22%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $17 → Bull $51. Current price implies expectations below the base case, but well above the bear case.
Discount ↓Growth →21%23%25%27%
8%$37$41$45$49
10%$24$26$29$32
12%$16$18$20$22
14%$12$13$15$16

Bull Case

  • Bull case ($51) offers 110% upside at 30% growth, 9% discount
  • 16% margin of safety vs. base case estimate
  • Market-implied growth (22%) ≤ historical CAGR (25%)

Bear Case

  • Bear case ($17) implies 29% downside at 20% growth, 12% discount
  • Using 25% growth — aggressive, watch for mean reversion
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5-Year Net Income Projection

Year 1$65.93M
Year 2$82.41M
Year 3$103.02M
Year 4$128.77M
Year 5$160.96M
Terminal$2.37B

📐 Model Inputs

Growth Rate25.0%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Net Income$52.74MTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. Uses Net Income (FCF not meaningful for insurers). See FAQ below for full methodology.

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Frequently Asked Questions

Is PRA stock undervalued or overvalued?
🟡 FAIRLY VALUED

PRA trades at $24.20, within 10% of our $22.56 intrinsic value estimate. At 10.0% WACC and 25.0% FCF growth, the market is pricing in assumptions roughly aligned with the 5-year historical CAGR. The valuation range spans $12.20 (bear) to $37.82 (bull).

What is PRA's intrinsic value?

Using a 5-year DCF model: Base FCF of $53M, projected at 25.0% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $387M net debt and dividing by 0.05B shares: Bear $12.20 | Base $22.56 | Bull $37.82. Current price $24.20 implies -6% to base case.

How is PRA's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 25.0% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($1.54B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 29.3x.