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Is First American Financial (FAF) a Great Value Stock Right Now?

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Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One company value investors might notice is First American Financial (FAF - Free Report) . FAF is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 9.62, which compares to its industry's average of 21.71. Over the past year, FAF's Forward P/E has been as high as 14.63 and as low as 6.22, with a median of 11.65.

Another valuation metric that we should highlight is FAF's P/B ratio of 1.15. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 1.20. FAF's P/B has been as high as 1.69 and as low as 0.84, with a median of 1.27, over the past year.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. FAF has a P/S ratio of 0.84. This compares to its industry's average P/S of 0.92.

Value investors will likely look at more than just these metrics, but the above data helps show that First American Financial is likely undervalued currently. And when considering the strength of its earnings outlook, FAF sticks out at as one of the market's strongest value stocks.


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