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First American Financial Corporation (FAF)
NYSE:FAF
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First American Financial
(NYSE:FAF)
68Neutral
First American Financial (FAF) vs. S&P 500 (SPY)
Market Cap
$6.01B
Dividend Yield3.69%
Average Volume (3M)856.61K
Price to Earnings (P/E)46.3
Beta (1Y)0.84
Revenue Growth-2.03%
EPS Growth-39.52%
CountryUS
Employees19,038
SectorFinancial
Sector Strength82
IndustryInsurance - Specialty
Share Statistics
EPS (TTM)1.25
Shares Outstanding103,088,165
10 Day Avg. Volume887,967
30 Day Avg. Volume856,612
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)1.09
Price to Cash Flow (P/CF)5.10
P/FCF Ratio4.50
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$73.75Price Target Upside27.09% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering4
First American Financial Business Overview & Revenue Model
Company DescriptionFirst American Financial Corporation (FAF) is a leading provider of title insurance, settlement services, and risk solutions for real estate transactions. Operating in the financial services sector, the company offers its products and services to both residential and commercial clients. Its core offerings include title insurance, closing and escrow services, and valuation products, all designed to facilitate real estate transactions and protect property buyers and lenders from potential losses associated with defects in title.
How the Company Makes MoneyFirst American Financial makes money primarily through its title insurance and services segment, which accounts for the majority of its revenue. The company generates income by providing title insurance policies that protect real estate owners and lenders against potential defects in property titles. In addition to title insurance premiums, First American earns revenue from various settlement services, including closing and escrow services, which are essential in completing real estate transactions. The company also offers valuation and data solutions that provide additional revenue streams. Significant partnerships with real estate agents, lenders, and developers further enhance its business by ensuring a consistent flow of transactions requiring its services. External factors such as the overall health of the real estate market and interest rate fluctuations can significantly influence the company's earnings.
First American Financial Financial Statement Overview
Summary
First American Financial shows a stable financial position with strengths in equity and cash flow management. However, the company faces challenges in revenue growth and profitability, requiring attention to sustain future financial health. The lack of debt in recent periods is a positive aspect, but the company must focus on enhancing profitability metrics.Income Statement
The company's revenue has shown fluctuations over the years, with a notable decline in 2024 compared to previous years. The gross profit margin is strong for the latest year, but EBIT and EBITDA margins are not available for 2024, indicating potential issues in profitability. The net profit margin in 2024 is lower compared to 2023, suggesting a decrease in net income efficiency.65
Positive
Balance Sheet
First American Financial maintains a robust equity position with a high equity ratio, indicating strong asset backing. The absence of total debt in 2024 is a positive sign for leverage management. However, fluctuating stockholders' equity over the years highlights some instability in financial positioning.75
Positive
Cash Flow
The company has demonstrated strong operating cash flow, with a significant free cash flow in 2024. However, the decline in free cash flow growth rate from previous years suggests challenges in maintaining cash generation. The high operating cash flow to net income ratio indicates efficient cash flow management relative to net earnings.70
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 6.12B | 938.50M | 7.61B | 9.22B | 7.09B | Gross Profit |
| 6.13B | -128.50M | 5.26B | 9.22B | 5.97B | EBIT |
| 0.00 | 401.50M | 326.00M | 419.00M | -94.16M | EBITDA |
| 372.80M | 595.40M | 585.70M | 0.00 | 1.13B | Net Income Common Stockholders |
| 131.10M | 216.80M | 263.00M | 1.24B | 696.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 1.72B | 3.61B | 1.22B | 1.23B | 1.28B | Total Assets |
| 5.35B | 16.80B | 19.64B | 16.47B | 12.81B | Total Debt |
| 2.42B | 1.39B | 2.28B | 2.46B | 1.01B | Net Debt |
| -1.72B | -2.21B | 1.06B | 1.23B | -264.71M | Total Liabilities |
| 442.70M | 11.94B | 14.96B | 10.68B | 7.89B | Stockholders Equity |
| 4.91B | 4.85B | 4.67B | 5.77B | 4.91B |
| Cash Flow | Free Cash Flow | |||
| 679.20M | 90.90M | 520.00M | 1.06B | 970.58M | Operating Cash Flow |
| 897.50M | 354.30M | 780.00M | 1.22B | 1.08B | Investing Cash Flow |
| -458.70M | 599.50M | -395.00M | -3.39B | -1.42B | Financing Cash Flow |
| -2.31B | 1.42B | -376.00M | 2.13B | 113.92M |
First American Financial Technical Analysis
Negative
58.03
Price Trends
63.66
Negative
63.64
Negative
61.98
Negative
Market Momentum
0.76
Negative
61.12
Neutral
59.01
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For FAF, the sentiment is Negative. The current price of 58.03 is below the 20-day moving average (MA) of 64.27, below the 50-day MA of 63.66, and below the 200-day MA of 61.98, indicating a bearish trend. The MACD of 0.76 indicates Negative momentum. The RSI at 61.12 is Neutral, neither overbought nor oversold. The STOCH value of 59.01 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for FAF.
First American Financial Risk Analysis
First American Financial disclosed 29 risk factors in its most recent earnings report. First American Financial reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
First American Financial Peers Comparison
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $5.46B | 7.79 | 14.90% | 2.24% | 4.56% | 15.94% | |
77 Outperform | $4.33B | 7.81 | 13.40% | 3.23% | 3.79% | 3.86% | |
76 Outperform | $421.67M | 13.61 | 12.35% | 0.82% | 14.93% | 43.88% | |
72 Outperform | $1.80B | 24.58 | 5.29% | 3.08% | 10.33% | 137.93% | |
68 Neutral | $6.01B | 46.35 | 2.69% | 3.69% | -2.03% | -39.52% | |
68 Neutral | $15.91B | 12.43 | 17.32% | 3.39% | 16.32% | 144.11% | |
64 Neutral | $12.70B | 9.08 | 9.19% | 4.89% | 16.29% | -8.64% |
* Financial Sector Average
Performance Comparison
FAF
First American Financial
58.03
4.43
8.26%
FNF
Fidelity National Financial
58.31
11.64
24.94%
ITIC
Investors Title Company
213.89
63.65
42.37%
MTG
MGIC Investment
22.43
3.03
15.62%
RDN
Radian Group
30.48
1.35
4.63%
STC
Stewart Information Services
64.10
6.13
10.57%
First American Financial Earnings Call Summary
Earnings Call Date: Feb 12, 2025 | % Change Since: -6.63% | Next Earnings Date: Apr 23, 2025
Earnings Call Sentiment Positive
Despite challenging conditions in the residential markets, the company achieved significant growth in commercial revenue and investment income, indicating strong operational performance. The positive trends in the commercial segment and strategic investments offset the difficulties in the residential market.Highlights
Commercial Revenue Growth
The commercial business exhibited strong performance with a 47% growth in revenue for Q4, driven by broad-based strength across all asset classes, particularly industrial and multifamily.
Investment Income Surge
Investment income in the title segment reached $155 million, exceeding expectations, largely due to a strategic portfolio rebalancing project.
Refinance Revenue Increase
Refinance revenue surged 75% compared to the previous year, driven by a 68% increase in closed orders.
Title Segment Revenue Growth
Title segment revenue was $1.6 billion, marking a 22% increase compared with the same quarter of 2023.
Home Warranty Segment Performance
The home warranty segment posted a revenue growth of 4% and an adjusted pretax margin of 18.2%.
Lowlights
Challenging Market Conditions
The residential purchase and refinance markets faced significant challenges due to low inventory, elevated home prices, and mortgage rates around 7%, leading to one of the lowest home sales markets since the mid-1990s.
Impact of Wildfires
The recent wildfires in the Los Angeles area caused widespread damage, affecting several employees and customers, highlighting external challenges faced by the company.
Company Guidance
During the Fourth Quarter and Full Year 2024 Earnings Conference Call for First American Financial Corporation, guidance for 2025 was cautiously optimistic despite elevated mortgage rates. The company reported an adjusted pretax title margin of 11.8% for the fourth quarter and 10.3% for the year. Title premiums and escrow revenues increased by double digits, with commercial revenue growing by 47%. Investment income in the title segment was $155 million, exceeding expectations. The home warranty segment reported a 4% growth in revenue with an 18.2% adjusted pretax margin. Looking to 2025, the company expects modest improvements in residential purchase and refinance activities, with purchase orders up 1% and refinance orders up 43% for the four weeks ending February 7, compared to the previous year. Commercial revenue was up 24% in January, and the company anticipates continued strength in this sector throughout the year.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.