Should Value Investors Buy First American Financial (FAF) Stock?
Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.
One stock to keep an eye on is First American Financial (FAF). FAF is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock has a Forward P/E ratio of 12.18. This compares to its industry's average Forward P/E of 25.91. Over the last 12 months, FAF's Forward P/E has been as high as 12.27 and as low as 9.42, with a median of 11.41.
FAF is also sporting a PEG ratio of 1.06. 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. FAF's industry currently sports an average PEG of 3.15. Over the past 52 weeks, FAF's PEG has been as high as 1.12 and as low as 0.79, with a median of 1.02.
Finally, our model also underscores that FAF has a P/CF ratio of 9.93. 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 stock's P/CF looks attractive against its industry's average P/CF of 14.78. Within the past 12 months, FAF's P/CF has been as high as 9.99 and as low as 6.39, with a median of 9.22.
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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