First American Financial Corporation
First American Financial Corporation Fundamental Analysis
First American Financial Corporation (FAF) shows moderate financial fundamentals with a PE ratio of 11.17, profit margin of 8.34%, and ROE of 11.87%. The company generates $7.4B in annual revenue with weak year-over-year growth of 2.04%.
Key Strengths
Areas of Concern
The stock receives a Fundamental Health Score of 47.8/100 based on profitability, valuation, growth, and balance sheet metrics. The D grade reflects weak fundamentals and significant financial concerns.
Fundamental Health Score
We analyze FAF's fundamental strength across five key dimensions:
Efficiency Score
WeakFAF struggles to generate sufficient returns from assets.
Valuation Score
ExcellentFAF trades at attractive valuation levels.
Growth Score
WeakFAF faces weak or negative growth trends.
Financial Health Score
ModerateFAF shows balanced financial health with some risks.
Profitability Score
WeakFAF struggles to sustain strong margins.
Key Financial Metrics
Is FAF Expensive or Cheap?
P/E Ratio
FAF trades at 11.17 times earnings. This suggests potential undervaluation.
PEG Ratio
When adjusting for growth, FAF's PEG of 0.38 indicates potential undervaluation.
Price to Book
The market values First American Financial Corporation at 1.26 times its book value. This may indicate undervaluation.
EV/EBITDA
Enterprise value stands at 5.31 times EBITDA. This is generally considered low.
How Well Does FAF Make Money?
Net Profit Margin
For every $100 in sales, First American Financial Corporation keeps $8.34 as profit after all expenses.
Operating Margin
Core operations generate 11.09 in profit for every $100 in revenue, before interest and taxes.
ROE
Management delivers $11.87 in profit for every $100 of shareholder equity.
ROA
First American Financial Corporation generates $3.83 in profit for every $100 in assets, demonstrating efficient asset deployment.
Following the Money - Real Cash Generation
Operating Cash Flow
First American Financial Corporation produces operating cash flow of $942.48M, showing steady but balanced cash generation.
Free Cash Flow
First American Financial Corporation generates strong free cash flow of $755.82M, providing ample flexibility for dividends, buybacks, or growth.
FCF Per Share
Each share generates $7.42 in free cash annually.
FCF Yield
FAF converts 11.02% of its market value into free cash.
Financial Ratios Analysis
Valuation Ratios
P/E Ratio
Price to earnings ratio
11.17
vs 25 benchmark
PEG Ratio
Price/earnings to growth ratio
0.38
vs 25 benchmark
P/B Ratio
Price to book value ratio
1.26
vs 25 benchmark
P/S Ratio
Price to sales ratio
0.92
vs 25 benchmark
Financial Health
Debt/Equity
Total debt to shareholders' equity
0.35
vs 25 benchmark
Current Ratio
Current assets to current liabilities
0.00
vs 25 benchmark
Efficiency Ratios
ROE
Return on equity percentage
0.12
vs 25 benchmark
ROA
Return on assets percentage
0.04
vs 25 benchmark
ROCE
Return on capital employed
0.05
vs 25 benchmark
How FAF Stacks Against Its Sector Peers
| Metric | FAF Value | Sector Average | Performance |
|---|---|---|---|
| P/E Ratio | 11.17 | 18.91 | Better (Cheaper) |
| ROE | 11.87% | 788.00% | Weak |
| Net Margin | 8.34% | 2164.00% | Weak |
| Debt/Equity | 0.35 | 0.82 | Strong (Low Leverage) |
| Current Ratio | 0.00 | 616.06 | Weak Liquidity |
| ROA | 3.83% | -23806.00% (disorted) | Weak |
FAF outperforms its industry in 2 out of 6 key metrics, but lagging in ROE.
Historical Growth Performance
5-Year Growth Trajectory
This section reviews First American Financial Corporation's 5-year compound annual growth rate (CAGR) and compares its performance against the typical investment style of its industry.
Revenue CAGR
7.41%
Industry Style: Value, Dividend, Cyclical
GrowingEPS CAGR
-79.83%
Industry Style: Value, Dividend, Cyclical
DecliningFCF CAGR
6.98%
Industry Style: Value, Dividend, Cyclical
Growing