RLI Lags Industry, Trades at Premium: How to Play the Stock

Shares of RLI Corp. RLI have lost 9.6% in the past year against its industry, the Finance sector and the Zacks S&P 500 composite’s return of 7.5%, 16% and 14.3%, respectively.Closing at $68.40 on Thursday, the stock stands almost 25% below its 52-week high of $91.14. The stock is trading below the 50-day and 200-day simple moving averages (SMA) of $69.57 and $76.22, respectively, indicating downward momentum.Image Source: Zacks Investment ResearchRLI’s Expensive ValuationBased on the forward 12-month price-to-book ratio, RLI is currently trading at 3.62X, above its industry average of 1.53X. Shares of The Travelers Companies, Inc. TRV and Cincinnati Financial Corporation CINF are also trading at a multiple higher than the industry average, while NMI Holdings Inc. NMIH shares are trading at a discount.RLI’s Growth Projection EncouragesThe Zacks Consensus Estimate for RLI’s 2025 earnings per share indicates a year-over-year increase of 7.3%. The consensus estimate for revenues is pegged at $1.77 billion, implying a year-over-year improvement of 6.3%. The consensus estimate for 2026 revenues indicates an increase of 3.4% from the corresponding 2025 estimates.RLI’s Favorable Return on CapitalRLI’s return on equity (ROE) has also been improving over the last few quarters, reflecting its efficiency in utilizing shareholders’ funds. The trailing 12 months ROE was 15.8%, which compared favorably with the industry average of 7.6%.Average Target Price for RLI Suggests UpsideBased on short-term price targets offered by three analysts, the Zacks average price target is $74 per share. The average suggests a potential 8.9% upside from the last closing price.Image Source: Zacks Investment ResearchFactors Acting in Favor of RLIRLI continues to grow through product diversification. Its compelling product portfolio, focus on introducing new products, re-underwriting of several of its products, sturdy business expansion, sustained rate increase and expanded distribution position this insurer well to generate an improved top line. A conservative underwriting and reserving policy helps RLI achieve favorable reserve releases from the prior years despite incurring catastrophe losses.RLI is one of the industry’s most profitable P&C writers, with an impressive track record of delivering 29 consecutive years of underwriting profitability.This insurer has been enhancing shareholders' value by distributing wealth in the form of dividend hikes, special dividends and share buybacks. It boasts an impressive dividend track record. It has increased regular dividends in each of the last 50 years and paid special dividends since 2011, making the stock an attractive pick for yield-seeking investors. The insurer has been strengthening its balance sheet by improving liquidity and leverage. A sound capital structure helps it meet the interests of its policyholders, enhance operations in the insurance sector and drive its book value for the long term.Wrapping Up: Keep On HoldingRLI is one of the industry’s most profitable P&C writers, with an impressive track record of delivering 29 consecutive years of underwriting profitability. A strong local branch office network, a broad range of product offerings, and a focus on specialty insurance lines should continue to contribute to its superior profitability. The stock's impressive dividend history makes it an attractive pick for yield-seeking investors. Given its premium valuation, it is prudent to wait for a better entry point for this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.One Big Gain, Every Trading DayTo help you take full advantage of this market, you’re invited to access every stock recommendation in all our private portfolios - for just $1.Zacks private portfolio services that closed 256 double and triple-digit winners in 2024 alone. That’s about one big gain every day the market was open. Of course, not all our picks are winners, but members have seen recent gains as high as +627% +1,340%, and +1,708%.Imagine how much you could profit with a steady stream of real-time picks from all our services that cover a number of strategies to suit a variety of investing and trading styles.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report RLI Corp. (RLI): Free Stock Analysis Report The Travelers Companies, Inc. (TRV): Free Stock Analysis Report Cincinnati Financial Corporation (CINF): Free Stock Analysis Report NMI Holdings Inc (NMIH): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks