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FAF Stock Trading at a Discount to Industry at 1.19X: Time to Hold?
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Key Takeaways
FAF expects improving housing trends to lift residential purchase and refinance activity.
Top-line growth is driven by rising premiums, escrow fees and stronger title agent business.
FAF boosts efficiency through tech upgrades, expanded title plants and broader valuation data.
First American Financial Corporation (FAF - Free Report) shares are trading at a discount to the Zacks Property and Casualty Insurance industry. Its forward price-to-book value of 1.19X is lower than the industry average of 1.48X, the Finance sector’s 4.32X and the Zacks S&P 500 Composite’s 8.52X. The insurer has a Value Score of A.
Shares of RenaissanceRe Holdings Ltd. (RNR - Free Report) , NMI Holdings Inc. (NMIH - Free Report) and Axis Capital Holdings Limited (AXS - Free Report) are also trading at a discount to the industry average.
Image Source: Zacks Investment Research
The insurer has a market capitalization of $6.33 billion. The average volume of shares traded in the last three months was 0.6 million.
FAF’s Price Performance
Shares of this insurer have gained 2.7% in the past year. It, however, underperformed the industry’s growth of 7.8%.
Image Source: Zacks Investment Research
FAF’s Growth Projection Encourages
The Zacks Consensus Estimate for First American’s 2025 earnings per share indicates a year-over-year increase of 25.9%. The consensus estimate for revenues is pegged at $7.27 billion, implying a year-over-year improvement of 18.5%.
The consensus estimate for 2026 earnings per share and revenues indicates an increase of 11.4% and 7.8%, respectively, from the corresponding 2025 estimates.
Earnings Surprise History
First American surpassed earnings estimates in each of the last four quarters, the average being 21.1%.
Average Target Price for FAF Suggests Upside
Based on short-term price targets offered by five analysts, the Zacks average price target is $77.20 per share. The average suggests a potential 26.3% upside from the last closing price.
Image Source: Zacks Investment Research
FAF’s Favorable Return on Capital
First American’s return on equity of 11% for the trailing 12 months compared favorably with the industry’s 8%, reflecting the company’s efficiency in utilizing shareholders’ funds.
Key Drivers of FAF Stock
First American stands to gain from increased demand for first-time home purchases among millennials. It expects housing demand, improving economy and labor markets to drive home price appreciation. Growing leadership in title data, courtesy of proprietary data extraction, sturdy distribution relationships, prudent underwriting and continued investments in technology positions FAF well for long-term growth.
FAF expects modest improvement in both residential purchase and refinance businesses for 2025. The company is witnessing early stabilization in the purchase market and thus expects housing demand, improving economy and labor markets to continue to drive home price appreciation.
Growing direct premiums, escrow fees and title agent premiums should continue to drive the top line.
The title insurer stays focused on strengthening its product offerings, enhancing its core business and expanding valuation and data businesses. Also, the expansion of title plant assets and the upgrade of technology solutions drive increased efficiency.
First American distributes wealth to shareholders via dividend hikes and share buybacks. Its dividend yield as well as payout ratio is better than the industry average, making it an attractive pick for yield-seeking investors.
Conclusion
Increased demand among millennials for first-time home purchases, improved rate environment and strength in commercial business should favor FAF’s results. The solid dividend yield is another positive.
First American should also benefit from the impressive dividend history, solid growth projections, and higher return on equity, as well as the affordability of shares. It is, therefore, wise to hold on to this Zacks Rank #3 (Hold) stock at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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FAF Stock Trading at a Discount to Industry at 1.19X: Time to Hold?
Key Takeaways
First American Financial Corporation (FAF - Free Report) shares are trading at a discount to the Zacks Property and Casualty Insurance industry. Its forward price-to-book value of 1.19X is lower than the industry average of 1.48X, the Finance sector’s 4.32X and the Zacks S&P 500 Composite’s 8.52X. The insurer has a Value Score of A.
Shares of RenaissanceRe Holdings Ltd. (RNR - Free Report) , NMI Holdings Inc. (NMIH - Free Report) and Axis Capital Holdings Limited (AXS - Free Report) are also trading at a discount to the industry average.
Image Source: Zacks Investment Research
The insurer has a market capitalization of $6.33 billion. The average volume of shares traded in the last three months was 0.6 million.
FAF’s Price Performance
Shares of this insurer have gained 2.7% in the past year. It, however, underperformed the industry’s growth of 7.8%.
Image Source: Zacks Investment Research
FAF’s Growth Projection Encourages
The Zacks Consensus Estimate for First American’s 2025 earnings per share indicates a year-over-year increase of 25.9%. The consensus estimate for revenues is pegged at $7.27 billion, implying a year-over-year improvement of 18.5%.
The consensus estimate for 2026 earnings per share and revenues indicates an increase of 11.4% and 7.8%, respectively, from the corresponding 2025 estimates.
Earnings Surprise History
First American surpassed earnings estimates in each of the last four quarters, the average being 21.1%.
Average Target Price for FAF Suggests Upside
Based on short-term price targets offered by five analysts, the Zacks average price target is $77.20 per share. The average suggests a potential 26.3% upside from the last closing price.
Image Source: Zacks Investment Research
FAF’s Favorable Return on Capital
First American’s return on equity of 11% for the trailing 12 months compared favorably with the industry’s 8%, reflecting the company’s efficiency in utilizing shareholders’ funds.
Key Drivers of FAF Stock
First American stands to gain from increased demand for first-time home purchases among millennials. It expects housing demand, improving economy and labor markets to drive home price appreciation. Growing leadership in title data, courtesy of proprietary data extraction, sturdy distribution relationships, prudent underwriting and continued investments in technology positions FAF well for long-term growth.
FAF expects modest improvement in both residential purchase and refinance businesses for 2025. The company is witnessing early stabilization in the purchase market and thus expects housing demand, improving economy and labor markets to continue to drive home price appreciation.
Growing direct premiums, escrow fees and title agent premiums should continue to drive the top line.
The title insurer stays focused on strengthening its product offerings, enhancing its core business and expanding valuation and data businesses. Also, the expansion of title plant assets and the upgrade of technology solutions drive increased efficiency.
First American distributes wealth to shareholders via dividend hikes and share buybacks. Its dividend yield as well as payout ratio is better than the industry average, making it an attractive pick for yield-seeking investors.
Conclusion
Increased demand among millennials for first-time home purchases, improved rate environment and strength in commercial business should favor FAF’s results. The solid dividend yield is another positive.
First American should also benefit from the impressive dividend history, solid growth projections, and higher return on equity, as well as the affordability of shares. It is, therefore, wise to hold on to this Zacks Rank #3 (Hold) stock at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.