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Should Value Investors Buy First American Financial (FAF) Stock?

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While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

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 tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

One company value investors might notice is First American Financial (FAF). FAF is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock holds a P/E ratio of 9.59, while its industry has an average P/E of 23.87. Over the past year, FAF's Forward P/E has been as high as 14.63 and as low as 7.47, with a median of 10.86.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. FAF has a P/S ratio of 0.88. This compares to its industry's average P/S of 1.01.

These figures are just a handful of the metrics value investors tend to look at, but they help show that First American Financial is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, FAF feels like a great value stock at the moment.


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