RLI Stock Trades Above 50-Day SMA: What Should Investors Do?

RLI Corp. RLI has been trading above its 50-day simple moving average (SMA), signaling a short-term bullish trend. Its share price, as of Jan. 16, 2025, was $77.83, down 14.6% from its 52-week high of $91.14.The 50-day SMA is a key indicator for traders and analysts to identify support and resistance levels. It is considered particularly important as this is the first marker of an uptrend or downtrend.With a market capitalization of $7.13 billion, RLI is set to gain from business expansion, rate increase, expanded distribution, financial flexibility, as well as impressive wealth distribution.RLI Price Movement vs. 50-Day Moving AverageImage Source: Zacks Investment ResearchPrice PerformanceShares of RLI have gained 8.8% in the past six months, outperforming the Finance sector’s and the S&P 500 composite’s return of 8.7% and 7.8%, respectively. It, however, underperformed the industry’s growth of 13.6%.RLI Price PerformanceImage Source: Zacks Investment ResearchRLI Shares are ExpensiveIts shares are trading at a premium to the Zacks Property and Casualty Insurance industry. Its price-to-book value of 2.04X is higher than the industry average of 1.68X.Shares of other property and casualty insurers like The Travelers Companies, Inc. TRV are also trading at a multiple higher than the industry average, while NMI Holdings Inc NMIH and Cincinnati Financial Corporation CINF shares are trading at a discount.Growth Projection for RLIThe Zacks Consensus Estimate for RLI’s 2025 earnings per share and revenues indicates an increase of 6.8% and 9.4%, respectively, from the corresponding 2024 estimates.Earnings have grown 18.7% in the past five years, better than the industry average of 11.4%.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 19%, which compared favorably with the industry average of 7.5%.Return on invested capital has also been improving over the last few quarters while the insurer has been making investments, reflecting RLI’s efficiency in utilizing funds to generate income.  ROIC in the trailing 12 months was 8.8%, which compared favorably with the industry’s average of 5.8%.Factors Impacting RLIRLI continues to grow in product diversification. The top line is set to benefit from a compelling product portfolio, focus on introducing new products, re-underwriting several of its products, sturdy business expansion, sustained rate increase and expanded distribution.RLI is exposed to catastrophe losses that induce underwriting volatility by the nature of its operations. Nonetheless, the insurer has a reinsurance program in place to cap its losses from catastrophes. It maintains a conservative underwriting and reserving policy and continues to achieve favorable reserve releases from the prior years.Despite exposure to cat loss, the combined ratio, which reflects its underwriting profitability, has been exemplary. It is continuously making efforts to boost underwriting results. To that end, RLI dropped the underperforming products from its property business.With regards to wealth distribution, RLI boasts an impressive dividend track record. RLI has been paying dividends for 187 consecutive quarters and increased regular dividends in each of the last 49 years, witnessing a five-year (2019-2024) CAGR of 8.8%. Its dividend yield of 1.4% is better than the industry average of 0.2%, making the stock an attractive pick for yield-seeking investors. In addition, the insurer has also been paying special dividends since 2011.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 aid growth in its book value for the long term.ConclusionRLI is one of the industry’s most profitable P&C writers, with an impressive track record of delivering 28 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.Despite an expensive valuation, RLI should benefit from a higher return on capital and favorable growth estimates. It is, therefore, wise to hold on to this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Just Released: Zacks Top 10 Stocks for 2025Hurry – you can still get in early on our 10 top tickers for 2025. 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(TRV): Free Stock Analysis Report Cincinnati Financial Corporation (CINF): Free Stock Analysis Report NMI Holdings Inc (NMIH): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks