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Safety Insurance Group, Inc. (SAFT) Intrinsic Value

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

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Safety Insurance Group, Inc. (SAFT)

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Intrinsic Value (DCF)

Current$76.49
→
Intrinsic$88.17
+15%
$60.62$88.17$140.55
Market implies 5% growth for 5 years
SAFT shows 15% potential upside using 8% growth — reasonable if fundamentals hold.
At $76, the market prices in only 5% growth — below historical 8%, suggesting low expectations.
Range: Bear $61 → Bull $141. Current price implies expectations below the base case, but well above the bear case.
Discount ↓Growth →4%6%8%10%
8%$104$114$124$135
10%$75$81$88$96
12%$58$63$68$74
14%$48$52$56$60

Bull Case

  • Bull case ($141) offers 84% upside at 10% growth, 9% discount
  • 13% margin of safety vs. base case estimate
  • Market-implied growth (5%) ≤ historical CAGR (8%)

Bear Case

  • Bear case ($61) implies 21% downside at 6% growth, 12% discount
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5-Year Net Income Projection

Year 1$76.39M
Year 2$82.50M
Year 3$89.10M
Year 4$96.23M
Year 5$103.93M
Terminal$1.53B

📐 Model Inputs

Growth Rate8.0%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Net Income$70.73MTTM 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 SAFT stock undervalued or overvalued?
🟢 UNDERVALUED

SAFT trades at $76.49 vs. our DCF-derived intrinsic value of $88.17, implying +17% upside. At a 10.0% WACC and 8.0% projected FCF growth, the market appears to be underpricing the present value of SAFT's future cash flows. The bear case ($64.12) still suggests upside, providing margin of safety.

What is SAFT's intrinsic value?

Using a 5-year DCF model: Base FCF of $71M, projected at 8.0% 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 $-13M net debt and dividing by 0.01B shares: Bear $64.12 | Base $88.17 | Bull $120.34. Current price $76.49 implies +17% to base case.

How is SAFT's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 8.0% 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 ($1.28B).

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: 18.2x.