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RLI Corp. (RLI) Intrinsic Value

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

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RLI Corp. (RLI)

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Intrinsic Value (DCF)

Current$59.38
→
Intrinsic$81.03
+36%
$55.13$81.03$130.26
Market implies 5% growth for 5 years
DCF analysis suggests RLI could have 36% upside at 13% growth — verify assumptions match your view.
At $59, the market prices in only 5% growth — below historical 13%, suggesting low expectations.
Range: Bear $55 → Bull $130. Current price implies expectations below the base case, but well above the bear case.
Discount ↓Growth →9%11%13%15%
8%$97$106$115$125
10%$69$75$81$88
12%$53$57$62$67
14%$43$46$50$54

Bull Case

  • Bull case ($130) offers 119% upside at 15% growth, 9% discount
  • 27% margin of safety vs. base case estimate
  • Market-implied growth (5%) ≤ historical CAGR (13%)

Bear Case

  • Bear case ($55) implies 7% downside at 10% growth, 12% discount
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5-Year Net Income Projection

Year 1$389.10M
Year 2$437.85M
Year 3$492.70M
Year 4$554.43M
Year 5$623.89M
Terminal$9.18B

📐 Model Inputs

Growth Rate12.5%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Net Income$345.78MTTM 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 RLI stock undervalued or overvalued?
🟢 UNDERVALUED

RLI trades at $59.38 vs. our DCF-derived intrinsic value of $81.03, implying +33% upside. At a 10.0% WACC and 12.5% projected FCF growth, the market appears to be underpricing the present value of RLI's future cash flows. The bear case ($56.24) still suggests upside, providing margin of safety.

What is RLI's intrinsic value?

Using a 5-year DCF model: Base FCF of $346M, projected at 12.5% 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 $60M net debt and dividing by 0.09B shares: Bear $56.24 | Base $81.03 | Bull $115.54. Current price $59.38 implies +33% to base case.

How is RLI's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 12.5% 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 ($7.55B).

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: 21.8x.