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Are Investors Undervaluing First American Financial (FAF) Right Now?

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The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One company to watch right now 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 holds a P/E ratio of 10.61, while its industry has an average P/E of 24.46. Over the last 12 months, FAF's Forward P/E has been as high as 14.63 and as low as 6.22, with a median of 11.46.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. FAF has a P/S ratio of 0.9. This compares to its industry's average P/S of 0.93.

These figures are just a handful of the metrics value investors tend to look at, but they help show that First American Financial is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, FAF feels like a great value stock at the moment.


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