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

Zacks Equity Research

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find 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 fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

First American Financial (FAF) is a stock many investors are watching right now. FAF is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A. The stock has a Forward P/E ratio of 11.94. This compares to its industry's average Forward P/E of 24.81. Over the past year, FAF's Forward P/E has been as high as 12.27 and as low as 9.21, with a median of 11.22.

FAF is also sporting a PEG ratio of 1.06. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. FAF's PEG compares to its industry's average PEG of 3. Within the past year, FAF's PEG has been as high as 1.12 and as low as 0.71, with a median of 1.01.

Finally, we should also recognize that FAF has a P/CF ratio of 9.87. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 13.57. Over the past year, FAF's P/CF has been as high as 9.89 and as low as 6.39, with a median of 9.13.

These are just a handful of the figures considered in First American Financial's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that FAF is an impressive value stock right now.


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