First American Financial Corp (FAF) stock analysis

P/E below its 5-year median

First American Financial's P/E of 9.4 is below its own 5-year median of 23.2.

P/E below the industry

First American Financial's P/E of 9.4 is below the Insurance Carriers median of 11.2.

P/S below the industry

First American Financial's price-to-sales of 0.85 is below the Insurance Carriers median of 1.16.

P/B below the industry

First American Financial's price-to-book of 1.27 is below the Insurance Carriers median of 1.57.

Trading below fair value

The share price of $66.97 is below our fair value estimate of $98.43.

Margin of safety over 20%

The price is 32.0% below fair value, more than the 20% cushion we look for.

Revenue growing under 10% a year

Revenue grew -0.7% a year over the last three fiscal years, short of the 10% we look for.

EPS growing 10%+ a year

Diluted EPS grew 34.8% a year over the last three fiscal years.

Earnings growth accelerating

Net income grew 51.9% over the last twelve months, against a 5-year average of -2.2% a year.

Growing faster than the industry

Revenue grew 14.1% over the last twelve months; the Insurance Carriers median is 6.5%.

Company guidance

No outlook found in earnings releases from the last twelve months.

Gross margin trend

Banks and insurers do not report gross profit.

Return on equity under 15%

Return on equity was 13.7% over the last twelve months and averaged 9.5% over five years; we look for 15% on both.

Return on assets over 1%

Return on assets was 4.1%; for a bank or insurer, 1% or more is considered good.

Return on equity below the industry

First American Financial's return on equity of 13.7% is below the Insurance Carriers median of 14.0%.

Earnings shrank over 5 years

Net income shrank 2.2% a year on average over the last five fiscal years.

Net margin above its 5-year average

Net margin was 9.1% over the last twelve months, against a 5-year average of 6.2%.

Net margin below the industry

First American Financial's net margin of 9.1% is below the Insurance Carriers median of 10.6%.

Debt level

Needs debt and equity figures.

Debt trend

Needs a balance sheet from five years ago with positive equity.

Debt coverage

Needs operating cash flow.

Interest coverage

Interest expense is not reported separately.

Short-term liquidity

Insurers do not split assets into current and non-current.

Bankruptcy risk (Altman Z)

The Altman model does not apply to insurers.

Pays a dividend

First American Financial paid dividends worth 3.4% of the share price over the last twelve months.

Yield below Treasuries

The 3.4% yield is below the 4.4% on a 1-year Treasury.

Yield below the top quarter

The top quarter of US dividend payers yield 3.8% or more; First American Financial yields 3.4%.

Dividend not cut

The dividend per share has not fallen by more than 10% in any of the last 10 fiscal years.

Covered by earnings

Dividends take 23.0% of net income.

Covered by free cash flow

Dividends take 20.9% of free cash flow.