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

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Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

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) and an A for Value. The stock has a Forward P/E ratio of 10.04. This compares to its industry's average Forward P/E of 24.19. 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 11.02.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. FAF has a P/S ratio of 0.86. This compares to its industry's average P/S of 1.02.

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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