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FAF Stock Trading at a Discount to Industry at 1.08X: Time to Buy?
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Key Takeaways
First American benefits from rising millennial homebuying demand and stabilizing purchase market trends.
FAF expects home price gains from stronger housing demand, economy and labor market conditions.
Growth in premiums, tech upgrades and buybacks supports efficiency and shareholder returns.
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 1.08X is lower than the industry average of 1.4X, the Finance sector’s 4.06X and the Zacks S&P 500 Composite’s 7.71X. 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 $5.95 billion. The average volume of shares traded in the last three months was 1.1 million.
FAF’s Price Performance
Shares of this insurer have lost 5.3% year to date compared with the industry’s decline of 4.6%.
Image Source: Zacks Investment Research
FAF’s Growth Projection Encourages
The Zacks Consensus Estimate for First American’s 2026 earnings per share indicates a year-over-year increase of 5.4%. The consensus estimate for revenues is pegged at $8.04 billion, implying a year-over-year improvement of 7.8%.
The consensus estimate for 2027 earnings per share and revenues indicates an increase of 7.8% and 5%, respectively, from the corresponding 2026 estimates.
The expected long-term earnings growth rate is 15.2%, outperforming the industry average of 7.7%. FAF has an impressive Growth Score of A. This style score helps analyze the growth prospects of a company.
Earnings Surprise History
First American surpassed earnings estimates in each of the last four quarters, the average being 22.9%.
Optimist Analyst Sentiment on NMIH
One of the three analysts covering the stock has raised estimates for 2026, and two of the three analysts have raised the same for 2027 over the past 30 days. Thus, the Zacks Consensus Estimate for 2026 and 2027 earnings has moved up 0.4% and 0.5%, respectively, in the past 30 days.
Average Target Price for FAF Suggests Upside
Based on short-term price targets offered by five analysts, the Zacks average price target is $81.60 per share. The average suggests a potential 40.1% upside from the last closing price.
Image Source: Zacks Investment Research
FAF’s Favorable Return on Capital
First American’s return on equity of 11.9% for the trailing 12 months compared favorably with the industry’s 7.3%, 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 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.
FAF also has a VGM Score of A. Stocks with a favorable VGM Score are those with the most attractive value, best growth and most promising momentum compared with peers. Coupled with the impressive dividend history, solid growth projections and higher return on equity, as well as the affordability of shares, the time appears right for potential investors to bet on this Zacks Rank #2 (Buy) insurer. 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 1.08X: Time to Buy?
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 1.08X is lower than the industry average of 1.4X, the Finance sector’s 4.06X and the Zacks S&P 500 Composite’s 7.71X. 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 $5.95 billion. The average volume of shares traded in the last three months was 1.1 million.
FAF’s Price Performance
Shares of this insurer have lost 5.3% year to date compared with the industry’s decline of 4.6%.
Image Source: Zacks Investment Research
FAF’s Growth Projection Encourages
The Zacks Consensus Estimate for First American’s 2026 earnings per share indicates a year-over-year increase of 5.4%. The consensus estimate for revenues is pegged at $8.04 billion, implying a year-over-year improvement of 7.8%.
The consensus estimate for 2027 earnings per share and revenues indicates an increase of 7.8% and 5%, respectively, from the corresponding 2026 estimates.
The expected long-term earnings growth rate is 15.2%, outperforming the industry average of 7.7%. FAF has an impressive Growth Score of A. This style score helps analyze the growth prospects of a company.
Earnings Surprise History
First American surpassed earnings estimates in each of the last four quarters, the average being 22.9%.
Optimist Analyst Sentiment on NMIH
One of the three analysts covering the stock has raised estimates for 2026, and two of the three analysts have raised the same for 2027 over the past 30 days. Thus, the Zacks Consensus Estimate for 2026 and 2027 earnings has moved up 0.4% and 0.5%, respectively, in the past 30 days.
Average Target Price for FAF Suggests Upside
Based on short-term price targets offered by five analysts, the Zacks average price target is $81.60 per share. The average suggests a potential 40.1% upside from the last closing price.
Image Source: Zacks Investment Research
FAF’s Favorable Return on Capital
First American’s return on equity of 11.9% for the trailing 12 months compared favorably with the industry’s 7.3%, 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 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.
FAF also has a VGM Score of A. Stocks with a favorable VGM Score are those with the most attractive value, best growth and most promising momentum compared with peers. Coupled with the impressive dividend history, solid growth projections and higher return on equity, as well as the affordability of shares, the time appears right for potential investors to bet on this Zacks Rank #2 (Buy) insurer. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.