Is First American Financial (FAF) Stock Undervalued Right Now?

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 a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

First American Financial (FAF) is a stock many investors are watching right now. FAF is currently sporting a Zacks Rank #2 (Buy), as well as an A grade for Value. The stock is trading with P/E ratio of 11.18 right now. For comparison, its industry sports an average P/E of 27.57. Over the past 52 weeks, FAF's Forward P/E has been as high as 15.32 and as low as 9.75, with a median of 12.00.

We should also highlight that FAF has a P/B ratio of 1.28. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 1.53. Over the past 12 months, FAF's P/B has been as high as 1.43 and as low as 1.10, with a median of 1.29.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a preferred metric because revenue can't really be manipulated, so sales are often a truer performance indicator. FAF has a P/S ratio of 0.98. This compares to its industry's average P/S of 1.28.

Another great Insurance - Property and Casualty stock you could consider is Fairfax Financial (FRFHF), which is a Zacks Rank of #2 (Buy) stock with a Value Score of A.

Furthermore, Fairfax Financial holds a P/B ratio of 1.48 and its industry's price-to-book ratio is 1.53. FRFHF's P/B has been as high as 1.51, as low as 0.93, with a median of 1.17 over the past 12 months.

These are just a handful of the figures considered in First American Financial and Fairfax 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 and FRFHF is an impressive value stock right now.

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This article originally published on Zacks Investment Research (zacks.com).

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