Wells Fargo has revised its forecast for RLI Corp., lowering the price target to $59 from the previous $62 while keeping an Equal Weight rating on the insurance company’s stock. Currently, RLI shares trade at $57.25, slightly above their 52-week low of $55.80. Analysis via InvestingPro indicates the stock may be undervalued relative to its estimated Fair Value.
This new valuation follows RLI’s recent report of underwhelming top-line growth. The firm continues to emphasize profitability over broad expansion, as noted by Wells Fargo’s assessment. Despite the slowdown in growth, the company demonstrates strong financial health, with a notable 24% return on equity and diluted earnings per share (EPS) of $4.37 over the last twelve months.
The property insurance segment remains particularly challenging for RLI, experiencing declines in the double-digit range. Wells Fargo projects that these difficulties will persist, forecasting a 5% revenue decrease for fiscal year 2026, a notable reversal from the 6.33% growth seen in the prior twelve months.
RLI’s growth remained nearly stagnant in 2025, reflecting the company’s cautious stance on pursuing new business avenues that could jeopardize profitability. This strategic choice appears set to continue unless a significant catastrophe drives demand, according to Wells Fargo’s outlook. Supporting its appeal to income-focused investors, RLI has sustained dividend payments for 50 years running, currently yielding approximately 4.61%.
From a valuation perspective, RLI trades at about three times its book value and over 19 times Wells Fargo’s projected EPS for 2027. The financial services firm regards this as a fair valuation, citing limited catalysts to boost earnings revisions and a challenging environment for share price gains amid modest growth forecasts. InvestingPro metrics echo this view, with a price-to-earnings (P/E) ratio of 13.53, a price-to-book ratio near 2.96, and an EPS forecast of $2.78 for fiscal 2026.
Recent quarterly results showed RLI exceeding earnings expectations with a Q4 2025 EPS of $0.94 versus the forecasted $0.79, representing an earnings surprise of nearly 19%. However, revenue came in below projections at $463.24 million compared to $474.66 million expected.
Market analysts have offered mixed but steady endorsements: Jefferies upgraded RLI from Underperform to Hold, citing a significant drop in valuation metrics such as the price-to-book ratio, which decreased from over 4 times last year to approximately 2.8 times. Meanwhile, Citizens analyst Matthew Carletti reiterated a Market Perform rating, highlighting RLI as a well-managed specialty insurer with a solid underwriting and book value growth track record, averaging around 9% compound annual growth over the previous decade.
These developments collectively paint a picture of a company balancing a tough growth environment with steadfast profitability and steady dividends, holding its valuation in check as market conditions evolve.