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FAF or WRB: Which Is the Better Value Stock Right Now?

Zacks Equity Research
NBT (NBTB) delivered earnings and revenue surprises of 4.55% and 0.19%, respectively, for the quarter ended June 2019. Do the numbers hold clues to what lies ahead for the stock?

Investors interested in Insurance - Property and Casualty stocks are likely familiar with First American Financial (FAF) and W.R. Berkley (WRB). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

First American Financial has a Zacks Rank of #2 (Buy), while W.R. Berkley has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that FAF has an improving earnings outlook. But this is just one piece of the puzzle for value investors.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.

The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

FAF currently has a forward P/E ratio of 11.75, while WRB has a forward P/E of 23.40. We also note that FAF has a PEG ratio of 1.07. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. WRB currently has a PEG ratio of 2.60.

Another notable valuation metric for FAF is its P/B ratio of 1.59. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, WRB has a P/B of 2.04.

Based on these metrics and many more, FAF holds a Value grade of B, while WRB has a Value grade of C.

FAF stands above WRB thanks to its solid earnings outlook, and based on these valuation figures, we also feel that FAF is the superior value option right now.


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First American Financial Corporation (FAF) : Free Stock Analysis Report
 
W.R. Berkley Corporation (WRB) : Free Stock Analysis Report
 
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