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First American (FAF)
NYSE:FAF
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First American Financial
(NYSE:FAF)
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Rating:66Neutral
Price Target:
$72.00
▲(7.33% Upside)
Action:DowngradedDate:02/20/26
The score is driven primarily by mixed financial performance: strong, improving cash generation and a generally stable balance sheet are offset by volatile profitability and flagged 2025 income statement consistency concerns. Technicals add support with a bullish moving-average setup and healthy (not overextended) momentum, while valuation is attractive (low P/E and solid yield). Earnings-call tone and 2026 growth outlook are constructive but tempered by residential/purchase softness, cost pressure, and execution/timing risk around technology-led margin gains.
Positive Factors
Consistent free cash flow generation
FAF has maintained positive free cash flow across all years and staged a notable rebound in 2024–2025. Durable FCF supports reinvestment in technology, dividends, opportunistic buybacks and M&A, providing financial flexibility to weather residential cyclicality and fund strategic growth.
Commercial segment strength and pricing power
A 35% commercial revenue surge with record ARPU and higher closed orders shows durable demand in higher-value commercial transactions. Commercial growth diversifies revenue away from volatile residential volumes, enhances margins per transaction, and supports sustainable top-line resilience and long-term market positioning.
Product and AI-led automation rollouts
Early adoption of Endpoint, Sequoia automation and rapid Owner's Portal growth indicate structural tech-led efficiency gains. As these products scale nationally (multi-year rollout plans), they can lower per-transaction costs, improve accuracy, and create differentiated service offerings that strengthen competitive advantage.
Negative Factors
Volatile profitability and income statement consistency
The income statement exhibits marked volatility and inconsistencies, including anomalous 2025 revenue/margin relationships. Such irregularities impair visibility into underlying earnings quality, complicate forecasting, and raise the risk that short‑term items could obscure sustainable profitability trends over the medium term.
Residential/purchase market weakness and rate lock-in
Persistent residential headwinds and rate lock effects constrain purchase volumes, the core driver of title demand. Prolonged softness in purchase activity limits revenue upside, increases sensitivity to housing cycles, and can delay margin recovery even if commercial and refinance segments improve.
Rising operating costs and uncertain timing of tech margin benefits
Elevated personnel and software expenses, combined with prior tech-investment margin drag, pressure near-term profitability. While automation promises future gains, the pace and scale required to offset higher operating costs are uncertain, creating execution risk for sustainable margin expansion over the medium term.
First American Financial (FAF) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$6.84B
Dividend Yield3.58%
Average Volume (3M)1.11M
Price to Earnings (P/E)11.1
Beta (1Y)0.58
Revenue Growth25.99%
EPS Growth426.44%
CountryUS
Employees19,038
SectorFinancial
Sector Strength70
IndustryInsurance - Specialty
Share Statistics
EPS (TTM)2.05
Shares Outstanding101,900,000
10 Day Avg. Volume1,217,091
30 Day Avg. Volume1,111,465
Financial Highlights & Ratios
PEG Ratio0.03
Price to Book (P/B)1.15
Price to Sales (P/S)0.85
P/FCF Ratio8.32
Enterprise Value/Market Cap1.08
Enterprise Value/Revenue0.99
Enterprise Value/Gross Profit1.37
Enterprise Value/Ebitda6.13
Forecast
1Y Price Target
$80.75Price Target Upside20.38% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering4
EPS Forecast (FY)6.12
Revenue Forecast (FY)$7.88B
First American Financial Business Overview & Revenue Model
Company DescriptionFirst 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 MoneyFirst 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 Key Performance Indicators (KPIs)
Any
Revenue By Segment
Breaks down sales figures by business unit, providing insight into which areas are contributing most to overall revenue and where there might be potential for expansion or risk.
Breaks down sales figures by business unit, providing insight into which areas are contributing most to overall revenue and where there might be potential for expansion or risk.
Data provided by:
The Fly
The FlyFirst American Financial Earnings Call Summary
Earnings Call Date:Feb 11, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Apr 22, 2026
Earnings Call Sentiment Positive
The call presented several strong positive developments: robust adjusted EPS (up 47%), broad Title revenue growth (up 14%), a powerful commercial surge (commercial revenue +35% with ARPU +22%), solid gains in agency, information and investment income, meaningful AI/product milestones (Endpoint and Sequoia) and market-share gains (+90 bps). These positives offset notable challenges in the residential/purchase market (purchase revenue down 4%, closed orders down 7%), rising operating expenses, and some near-term uncertainty around timing and scale of technology-driven margin improvements. On balance, the company displayed clear operational momentum, diversified revenue tailwinds (commercial strength, 1031 deposit growth, adjacent businesses), and a disciplined capital-return posture, while acknowledging ongoing residential headwinds and measured execution risk on tech rollouts.Q4-2025 Updates
Positive Updates
Strong EPS and GAAP Results
Adjusted EPS of $1.99, up 47% year-over-year; GAAP EPS of $2.05. Results include one-time benefits of $28.0M ($0.20 per diluted share).
Title Segment Revenue Growth
Title adjusted revenue of $1.90B, up 14% year-over-year; Title pretax margin 14.9% (14% adjusted).
Commercial Segment Surge
Commercial revenue $339.0M, up 35% year-over-year. Closed commercial orders up 10% and commercial ARPU increased 22%, with ARPU setting a record at $18,600 per closing.
Refinance and Agency Strength
Refinance revenue up 47% (closed orders +44%, ARPU +2%). Agency revenue $790.0M, up 13% year-over-year (reflecting remittances with ~one-quarter reporting lag).
Information, Investment and Other Revenue Gains
Information & other revenues $274.0M, up 15% year-over-year; investment income $157.0M, up 1% year-over-year despite several Fed cuts; net investment gains $28.0M vs. $62.0M net losses prior year.
Product & AI Milestones
Launched Endpoint (AI-powered escrow): 153 orders opened and 47 closed on platform; Sequoia AI live in Phoenix and three Southern California markets with ~40% automation rates for supported refinance search/exam products; planned geographic expansion (Sequoia purchases in Q2; CA/FL by year-end; national by 2027).
Digital/Fraud Protection Momentum
Owner’s Portal reached ~53,000 users, growing 580% quarter-over-quarter, offering free title monitoring and fraud alerts in 25 direct-operation states.
Bank Deposit & Adjacent Business Progress
First American Trust 1031 exchange deposits grew from $94.0M year-end to over $300.0M currently; company expects ~$1.0B by year-end. Record earnings reported at the bank, Home Warranty, ServiceMac, and First Funding.
Market Share Gains & Capital Returns
Gained ~90 basis points of organic market share over the last 12 months. Returned capital via dividends (36% payout ratio) and buybacks (buybacks equivalent to ~20% of net income), returning ~56% of net income to shareholders in 2025.
Operational & Loss Metrics
Success ratio 47% for the quarter; provision for policy losses and other claims $44.0M (3% of title premiums & escrow fees); current policy-year ultimate loss rate 3.75% with a $11.0M net decrease in prior-year loss reserves.
Negative Updates
Sluggish Residential Market and Purchase Weakness
Existing home sales at ~4.0M vs. a normalized ~5.5M. Purchase revenue declined 4% quarter-over-quarter with closed purchase orders down 7% (open purchase orders down 7% in Q4), implying continued near-term weakness in purchase revenue.
Residential Rate-Lock and Affordability Headwinds
Rate lock-in effect and constrained affordability continue to depress residential transaction volumes; company expects only modest purchase growth of 7%–8% in 2026 and noted January open purchase orders were essentially flat.
Higher Operating Costs
Personnel costs increased to $581.0M (+11% year-over-year) driven by incentive compensation; other operating expenses $282.0M (+7% year-over-year) primarily from higher production and software costs.
Tax Rate Above Normalized Level
Effective tax rate of 25.7% in the quarter versus a normalized tax rate of ~24%, driven by higher income mix from non-insurance businesses which are taxed at higher rates.
Refinance Still Small Portion of Direct Revenue
Despite strong refinance growth rates, refinance remains just 7% of direct revenue, highlighting how subdued the refinance market remains compared with historical norms.
Technology Investment Headwinds and Uncertainty of Margin Timing
Company acknowledged prior technology investment created margin drag (previously referenced ~100 bps); although investments are beginning to roll off and AI initiatives show promise, realized productivity and margin lift will be gradual and require scale—current benefits remain small and timing of full upside uncertain.
State Rate Actions – Texas Rate Reduction
Texas title-rate reduction would reduce Title total revenue and net operating revenue by ~50 basis points assuming 2025 volumes; residential market share in Texas is underweight which may exacerbate impact.
Forecast Uncertainty and Difficulty Forecasting Commercial
Management emphasized uncertainty in forecasting commercial growth (difficult to quantify upside vs. 2025), and declined to give a precise 2026 commercial growth percentage despite optimism.
Company Guidance
Management guided that 2026 should see growth across its three major revenue drivers—commercial, purchase and refinance—with commercial expected to deliver a record revenue year (exceeding the 2022 peak) and purchase revenue forecast at +7–8%; they noted open purchase orders were down 7% in Q4 (implying Q1 weakness), January open purchase orders were essentially flat, January refinance open orders were +72%, and January closed orders/day were: purchase -7%, commercial +13%, refinance +48%. Key operating and financial metrics cited: Title adjusted revenue $1.9B (+14%), commercial revenue $339M (+35%) with closed orders +10% and ARPU +22% to $18,600, refinance revenue +47% (refi = 7% of direct revenue), agency revenue $790M (+13%), information & other $274M (+15%), Title pre‑tax margin 14.9% (14.0% adjusted), success ratio 47%, provision for policy losses 3% of premiums/fees with a 3.75% policy‑year ultimate loss rate, Q4 investment income $157M (+1%) and net investment gains $28M, 1031 deposits up from $94M YE to >$300M (target ≈$1,000M by year‑end), plan to roll out Endpoint nationally over two years (153 orders opened/47 closed today) and expand Sequoia (40% automation in current markets) toward broader national rollout in 2027, capital priorities of tech investment, M&A, dividends (2025 payout 36%, target ~40%) and opportunistic buybacks (2025 returned ~56% of net income).First American Financial Financial Statement Overview
Summary
Cash flow is a clear strength (positive FCF across all years shown and a strong rebound in 2024–2025), and the balance sheet appears stable with generally moderate leverage. However, earnings quality and consistency are a key concern: profitability has been volatile since 2021 and the 2025 revenue/margin relationship is flagged as abnormal, raising uncertainty around the durability of reported results.Income Statement
Profitability and growth have been volatile. Revenue was relatively stable from 2022–2024 (down in 2022–2023, modestly up in 2024), but 2025 shows a sharp reported revenue drop (-90.9%) that raises consistency/quality concerns. Margins were thin in 2022–2024 (net margin ~2%–4%), while 2020–2021 were materially stronger; 2025 shows unusually high reported margins versus revenue, further signaling potential one-time items or mix/reporting distortion. Overall, the earnings profile lacks steady momentum despite periods of strong profitability.41
Neutral
Balance Sheet
Leverage looks generally manageable for the period with debt-to-equity around ~0.37–0.49 from 2020–2024, and equity has remained sizable versus total assets. Returns on equity were strong in 2020–2021, then fell meaningfully in 2022–2024, indicating weaker profitability on the capital base. 2025 shows a debt-to-equity value of 0.0 alongside improved return on equity, which appears inconsistent with the reported debt level and suggests a data quality/definition issue; excluding that anomaly, the balance sheet reads as stable with moderate leverage but a reduced return profile versus prior peaks.64
Positive
Cash Flow
Cash generation has been a relative strength: operating cash flow and free cash flow were solid in 2020–2022, dipped sharply in 2023, and then rebounded strongly in 2024–2025. Free cash flow has been positive in every year shown, and recent free cash flow growth is positive (2024–2025). Cash flow conversion versus earnings looks healthy in most years where available (e.g., free cash flow tracking a meaningful share of net income), though some provided coverage ratios are reported as 0.0 and can’t be relied upon.71
Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 7.45B | 6.12B | 6.00B | 7.59B | 9.21B |
| Gross Profit | 7.12B | 3.76B | 3.71B | 4.28B | 5.64B |
| EBITDA | 1.20B | 522.40M | 595.40M | 586.20M | 1.87B |
| Net Income | 621.80M | 131.10M | 216.80M | 263.00M | 1.24B |
Balance Sheet | |||||
| Total Assets | 16.23B | 14.91B | 16.80B | 19.64B | 16.47B |
| Cash, Cash Equivalents and Short-Term Investments | 1.39B | 1.80B | 3.66B | 1.29B | 1.29B |
| Total Debt | 1.91B | 2.42B | 2.19B | 1.92B | 2.46B |
| Total Liabilities | 10.73B | 9.98B | 11.94B | 14.96B | 10.68B |
| Stockholders Equity | 5.50B | 4.91B | 4.85B | 4.67B | 5.77B |
Cash Flow | |||||
| Free Cash Flow | 762.50M | 679.20M | 90.90M | 520.00M | 1.06B |
| Operating Cash Flow | 950.80M | 897.50M | 354.30M | 780.00M | 1.22B |
| Investing Cash Flow | -1.46B | -458.70M | 599.50M | -395.00M | -3.39B |
| Financing Cash Flow | 164.40M | -2.31B | 1.42B | -376.00M | 2.13B |
First American Financial Technical Analysis
Positive
67.08
Price Trends
63.57
Positive
62.88
Positive
61.53
Positive
Market Momentum
1.04
Negative
54.42
Neutral
59.80
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 67.08 is above the 20-day moving average (MA) of 65.67, above the 50-day MA of 63.57, and above the 200-day MA of 61.53, indicating a bullish trend. The MACD of 1.04 indicates Negative momentum. The RSI at 54.42 is Neutral, neither overbought nor oversold. The STOCH value of 59.80 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive 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
UnderperformOutperform
Sector (68)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
82 Outperform | $5.99B | 9.11 | 12.75% | 2.02% | 2.40% | 1.18% | |
76 Outperform | $5.63B | 8.57 | 12.35% | 1.88% | 2.78% | -0.50% | |
74 Outperform | $14.08B | 23.06 | 7.93% | 3.69% | 3.91% | 55.78% | |
70 Outperform | $4.68B | 8.28 | 12.72% | 2.78% | -3.68% | 3.65% | |
68 Neutral | $5.85B | 8.21 | ― | 1.89% | 2.20% | 9.90% | |
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% | |
66 Neutral | $6.84B | 11.06 | 11.95% | 3.58% | 25.99% | 426.44% |
* Financial Sector Average
FAF
First American Financial
67.08
4.12
6.54%
FNF
Fidelity National Financial
51.94
-4.80
-8.46%
MTG
MGIC Investment
26.13
2.55
10.83%
RDN
Radian Group
34.34
2.84
9.01%
ESNT
Essent Group
59.58
3.95
7.10%
ACT
Enact Holdings
41.46
8.20
24.65%
First American Financial Corporate Events
Executive/Board Changes
First American Financial announces board retirement and change
Neutral
Jan 21, 2026
On Jan. 21, 2026, Martha Wyrsch retired from the Board of Directors of First American Financial, marking a change in the company’s board composition and governance structure.
The most recent analyst rating on (FAF) stock is a Buy with a $65.00 price target. To see the full list of analyst forecasts on First American Financial stock, see the FAF Stock Forecast page.
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
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.