First American Financial (FAF) AI Stock Analysis

• Market Cap: $6.63B
• Dividend Yield: 3.47%
• Average Volume (3M): 669.19K
• Price to Earnings (P/E): 14.0
• Beta (1Y): 0.61
• Revenue Growth: 25.99%
• EPS Growth: 426.44%
• Country: US
• Employees: 19,038
• Sector: Real Estate
• Sector Strength: 53
• Industry: Insurance - Specialty
• EPS (TTM): 1.84
• Shares Outstanding: 101,900,000
• 10 Day Avg. Volume: 388,724
• 30 Day Avg. Volume: 669,186
• PEG Ratio: -1.26
• Price to Book (P/B): 1.32
• Price to Sales (P/S): 1.06
• P/FCF Ratio: 9.55
• Enterprise Value/Market Cap: 1.27
• Enterprise Value/Revenue: 1.19
• Enterprise Value/Gross Profit: 1.89
• Enterprise Value/Ebitda: 8.35
• 1Y Price Target: $74.00
• Price Target Upside: 12.14% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 4
• EPS Forecast (FY): 5.44
• Revenue Forecast (FY): $7.28B

• Rating: 77 Outperform
• Price Target: $75.00 ▲(13.65% Upside)

First American Financial's strong financial performance, particularly in revenue growth and cash flow generation, is a major positive factor. The technical analysis supports a bullish outlook with strong upward momentum. The earnings call provided optimistic guidance, especially in the commercial segment, despite challenges in the residential market. Valuation metrics suggest the stock is fairly valued with an attractive dividend yield. Overall, the stock presents a solid investment opportunity with room for improvement in operational efficiency and profitability.

Positive Factors

Revenue Growth

The 14% revenue growth, especially in the commercial segment, indicates strong market demand and effective business strategies, supporting long-term financial health.

Investment in Technology

Strategic investments in AI and technology can enhance operational efficiency and open new revenue streams, strengthening competitive advantage.

Cash Flow Generation

Strong cash flow generation provides financial flexibility and supports ongoing investments and shareholder returns, underpinning long-term stability.

Negative Factors

Operational Efficiency

Negative EBIT and EBITDA margins suggest inefficiencies that could hinder profitability, requiring strategic improvements to sustain long-term growth.

Residential Market Challenges

Declining residential purchase revenue reflects market challenges that could persist, impacting overall revenue and necessitating strategic adjustments.

Higher Operating Costs

Rising operating costs can pressure margins and reduce profitability, necessitating cost management to maintain financial health.

First American Financial Business Overview & Revenue Model

Company Description

First American Financial Corporation, through its subsidiaries, provides financial services. It operates through Title Insurance and Services, and Specialty Insurance segments. The Title Insurance and Services segment issues title insurance policies on residential and commercial property, as well as offers related products and services. This segment also provides closing and/or escrow services; products, services, and solutions to mitigate risk or otherwise facilitate real estate transactions; and appraisals and other valuation-related products and services, lien release and document custodial services, warehouse lending services, default-related products and services, mortgage subservicing, and related products and services, as well as banking, trust, and wealth management services. In addition, it accommodates tax-deferred exchanges of real estate; and maintains, manages, and provides access to title plant data and records. This segment offers its products through a network of direct operations and agents in 49 states and in the District of Columbia, as well as in Canada, the United Kingdom, Australia, South Korea, and internationally. The Specialty Insurance segment provides property and casualty insurance comprising coverage to residential homeowners and renters for liability losses and typical hazards, such as fire, theft, vandalism, and other types of property damage. It also offers residential service contracts that cover residential systems, such as heating and air conditioning systems, and appliances against failures that occur as the result of normal usage during the coverage period. First American Financial Corporation was founded in 1889 and is headquartered in Santa Ana, California.

How the Company Makes Money

First American Financial generates revenue primarily through title insurance premiums, which are collected when policies are issued for real estate transactions. The company also earns money from settlement services, which include closing services and escrow fees. Additionally, FAF has a significant income stream from its Data and Analytics segment, providing real estate data and technology solutions to businesses and government agencies. The company's partnerships with various real estate professionals, lenders, and developers further enhance its revenue opportunities, as these relationships drive a steady flow of transactions requiring title insurance and related services.

First American Financial Financial Statement Overview

Summary

First American Financial demonstrates strong revenue growth and cash flow generation, which are positive indicators of financial health. However, the negative EBIT and EBITDA margins in the TTM raise concerns about operational efficiency. The balance sheet is stable with moderate leverage, but profitability could be enhanced. Overall, the company is in a solid financial position with opportunities for improvement in profitability and operational efficiency.

Income Statement

First American Financial shows a strong revenue growth rate of 8.8% in the TTM, indicating a positive trajectory. The gross profit margin is robust at 71.98%, reflecting efficient cost management. However, the net profit margin is relatively low at 9.11%, suggesting room for improvement in profitability. The negative EBIT and EBITDA margins in the TTM are concerning, indicating potential operational inefficiencies.

Balance Sheet

The company maintains a healthy debt-to-equity ratio of 0.54, indicating moderate leverage. The return on equity is 9.48%, showing a reasonable return on shareholders' investments. The equity ratio stands at 30.09%, reflecting a stable capital structure. Overall, the balance sheet is stable, but there is potential risk if leverage increases.

Cash Flow

The cash flow statement reveals a positive free cash flow growth rate of 5.66% in the TTM, indicating strong cash generation. The operating cash flow to net income ratio is 2.54, suggesting efficient cash conversion. The free cash flow to net income ratio is 0.78, highlighting solid cash flow relative to earnings. Overall, the cash flow position is strong, supporting financial flexibility.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	7.08B	6.12B	6.00B	7.59B	9.21B	7.08B
Gross Profit	4.46B	3.76B	3.71B	4.28B	5.64B	4.32B
EBITDA	1.01B	522.40M	595.40M	586.20M	1.87B	1.13B
Net Income	482.30M	131.10M	216.80M	263.00M	1.24B	696.00M
Balance Sheet
Total Assets	17.61B	14.91B	16.80B	19.64B	16.47B	12.80B
Cash, Cash Equivalents and Short-Term Investments	2.99B	1.80B	3.66B	1.29B	1.29B	1.32B
Total Debt	2.85B	2.42B	2.19B	1.92B	2.46B	1.82B
Total Liabilities	12.28B	9.98B	11.94B	14.96B	10.68B	7.87B
Stockholders Equity	5.30B	4.91B	4.85B	4.67B	5.77B	4.91B
Cash Flow
Free Cash Flow	704.20M	679.20M	90.90M	520.00M	1.06B	970.58M
Operating Cash Flow	906.10M	897.50M	354.30M	780.00M	1.22B	1.08B
Investing Cash Flow	-1.34B	-458.70M	599.50M	-395.00M	-3.39B	-1.42B
Financing Cash Flow	403.50M	-2.31B	1.42B	-376.00M	2.13B	113.92M

First American Financial Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 65.99
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For FAF, the sentiment is Positive. The current price of 65.99 is above the 20-day moving average (MA) of 63.75, above the 50-day MA of 62.81, and above the 200-day MA of 61.38, indicating a bullish trend. The MACD of 0.82 indicates Negative momentum. The RSI at 57.13 is Neutral, neither overbought nor oversold. The STOCH value of 78.64 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for FAF.

First American Financial Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ACT	82 Outperform	$5.62B	8.94	12.75%	2.10%	2.40%	1.18%
MTG	78 Outperform	$6.38B	9.17	14.40%	1.96%	2.20%	9.90%
FAF	77 Outperform	$6.63B	13.98	9.28%	3.47%	25.99%	426.44%
FNF	74 Outperform	$16.14B	13.86	14.22%	3.51%	3.91%	55.78%
ESNT	73 Outperform	$6.10B	9.02	12.35%	1.97%	2.78%	-0.50%
RDN	66 Neutral	$4.83B	8.90	12.56%	2.86%	-3.68%	3.65%
Sector *	65 Neutral	$2.17B	12.19	3.79%	4.94%	3.15%	1.96%

First American Financial Corporate Events

First American Financial’s Strong Q3 2025 Performance

First American Financial Corporation is a leading provider of title, settlement, and risk solutions for real estate transactions, known for its digital transformation initiatives in the industry. In the third quarter of 2025, the company reported a significant increase in total revenue, reaching $2.0 billion, up 41% from the previous year, and a net income of $190 million, marking a substantial recovery from a net loss in the same period last year. Key financial highlights include a 12.9% pretax margin in the Title Insurance and Services segment and a 14.1% pretax margin in the Home Warranty segment, alongside a 29% increase in commercial revenues. The company also repurchased shares worth $34 million and raised its dividend by 2%. Looking ahead, First American Financial is optimistic about its growth prospects, emphasizing its strategic investments in data, technology, and AI to enhance productivity and capitalize on future market opportunities.

First American’s Earnings Call: Growth Amid Challenges

First American’s recent earnings call painted a picture of robust growth and strategic optimism, despite some ongoing challenges. The company reported significant increases in commercial revenue and investment income, largely driven by strong performances in the industrial and multifamily sectors. While the residential market faces hurdles due to affordability issues and high mortgage rates, First American remains confident about future prospects, particularly with advancements in AI and technology poised to boost productivity. However, higher operating costs and potential rate cuts in Texas pose challenges that the company must navigate.