July 18, 2024
Top 10 Stock First American Financial Hold Recommendation
How to read the ranks
For every stock, we judge its performance against its peers and rank it on a scale of 1 to 100. The higher the rank, the better the stock performs than its peers. And, we do this for six investment strategies:
Value - shows how good of a value the stock is. Green is "inexpensive"; red is "expensive".
Growth - shows a company's growth potential. Green is "high growth" expected; red is "tough times ahead".
Safety - relates to the amount of debt a company has. Green is low debt level; red is high debt level.
Combined Financial - this isn't an average of the first three ranks but rather a consolidated view across several financial indicators. Green = good; red = tread carefully.
(NEW) Sentiment - quantifies professional analyst ratings and holdings as well as market pulse. Green = positive sentiment; red = skepticism (Only available to Premium Subscribers).
(NEW) 360° View - the ultimate rating with all financial and non-financial indicators.
Snapshot: First American Financial – Top 10 Stock in Dow Jones U.S. Insurance Index
First American Financial is listed as a top 10 stock on July 18, 2024 in the market index D.J. US Insurance because of its high performance in at least one of the Obermatt investment strategies. Only the Obermatt Value Rank exhibits above-average performance, which means that the stock is seen as critical by the professional community and other financial facts are below average, conveying mixed investment signals. Based on the Obermatt 360° View of 49 (49% performer), Obermatt assesses an overall hold recommendation for First American Financial on July 18, 2024.
Snapshot: Obermatt Ranks
| Country | USA |
| Industry | Property & Casualty Insurance |
| Index | Dividends USA, Employee Focus US, D.J. US Insurance, S&P MIDCAP |
| Size class | X-Large |
When Obermatt identifies the Top 10 stocks in a market, it’s based on a certain investment strategy. The best performing stocks usually aren’t the ones that everyone is talking about (those are often "over-priced" and have low Value ranks).
For each investment strategy, we provide you with more detailed analysis and our recommendation. You see the ranks of the top 10 stocks ranked by that particular investment strategy (360° View, Sentiment, Value, Growth, Safety and Combined Financial Performance).
360° View: Obermatt 360° View First American Financial Hold
| 360 METRICS | July 18, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 78 |
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| GROWTH | ||||||||
| GROWTH | 15 |
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| SAFETY | ||||||||
| SAFETY | 34 |
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| SENTIMENT | ||||||||
| SENTIMENT | 12 |
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| 360° VIEW | ||||||||
| 360° VIEW | 49 |
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ANALYSIS: With an Obermatt 360° View of 49 (better than 49% compared with alternatives), overall professional sentiment and financial characteristics for the stock First American Financial are below the industry average. The 360° View is based on consolidating four consolidated indicators, with three out of four indicators below average for First American Financial. Only the consolidated Value Rank has an attractive rank of 78, which means that the share price of First American Financial is on the lower side compared with the typical size in indicators such as revenues, profits, and invested capital. This means that the stock price is lower than for 78% of alternative stocks in the same industry. All other consolidated ranks are below average. The consolidated Growth Rank has a low rank of 15, which means that the company exhibits below-average growth momentum when looking at financial metrics such as revenue, profit, and invested capital growth as well as stock returns. The consolidated Safety Rank has a riskier rank of 34, meaning the company has a riskier financing structure than 66% comparable companies when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. Finally, professionals are more pessimistic about the stock than for 88% of alternative investment opportunities, reflected in the consolidated Sentiment Rank of 12. ...read more
RECOMMENDATION: With a consolidated 360° View of 49, First American Financial is worse than 51% of all alternative stock investment opportunities based on the Obermatt Method. Only one of the consolidated Obermatt Ranks exhibits above-average performance, namely the Value Rank at a level of 78. All other ranks are below average, so proceed with caution. The company has below-average growth expectations (Growth Rank of 15), a riskier financing structure than the competition (Safety Rank of 34), and the market sentiment in the professional investor community ranking at (Sentiment Rank of 12) is negative. This combination is sensitive to a crisis, because high debt levels (low safety) require growth to finance the debt burden. It’s no wonder that the investor community indicators are skeptical (low sentiment). Good value is sometimes an indication that the company's future is challenging. The below-par growth performance may be the reason for this assessment. We recommend evaluating whether the future of First American Financial is as challenging as the low price of the stock suggests. Since the professional community is pessimistic, you might need to worry about the future of First American Financial. Only invest if you have solid reasons to believe that the low growth is temporary and the current market sentiment is an overreaction, possibly due to reputational issues in the past. ...read more
Sentiment Strategy: Professional Market Sentiment for First American Financial negative
ANALYSIS: With an Obermatt Sentiment Rank of 12 (better than 12% compared with alternatives), overall professional sentiment and engagement for the stock First American Financial is critical, mostly below average. The Sentiment Rank is based on consolidating four sentiment indicators, with three out of four metrics below average for First American Financial. Analyst Opinions are at a rank of 62 (better than 62% of alternative investments), which means that, currently, stock research analysts tend to recommend a stock investment in the company. This is a good sign, were it not for Analyst Opinions Change with a low rank of 9, which means that currently, stock research experts are changing their opinions for the worse. In other words, they are getting more critical of a stock investment in First American Financial. The Professional Investors rank is also low at 12, meaning that professional investors hold less stock in this company than in 88% of alternative investment opportunities. Pros tend to invest in other companies. Even worse, Market Pulse has a low rank of 29, which means that the current professional news and professional social networks are critical of this company (more negative news than for 71% of competitors). ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 12 (less encouraging than 88% compared with investment alternatives), First American Financial has a reputation among professional investors that is far below that of its competitors. There are several negative sentiment signals, with only the Analyst Opinions Rank above average. This could be a stock with a long reputation for being positive but where things are worsening. Most analysts may not see it yet, but some have, and the professionals are already quite pessimistic. Proceed with caution when investing in this stock. ...read more
Value Strategy: First American Financial Stock Price Value at the top
ANALYSIS: With an Obermatt Value Rank of 78 (better than 78% compared with alternatives) for 2022, First American Financial shares are significantly less expensive than comparable stocks. The Value Rank is based on consolidating four value indicators, where three out of four indicators are above average for First American Financial. Price-to-Sales (P/S) is 62 which means that the stock price compared with what market professionals expect for future sales is lower than for 62% of comparable companies, indicating a good value for First American Financial's revenue size. The same is valid for the Price-to-Book Capital ratio (also referred to as market-to-book ratio) with a Price-to-Capital Rank of 73. Finally, compared with other companies in the same industry, dividend yields of First American Financial are expected to be higher than for 92% of all competitors (a Dividend Yield rank of 92). The only low rank is for expected profits with a Price-to-Profit Rank of 46, indicating that the market expects the company's profit to be low despite a high dividend. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 78, is a buy recommendation based on First American Financial's stock price compared with the company's operational size and dividend yields. The low Profit Rank could result from a one-off charge, for instance, for an accident, a legal settlement, or a restructuring project. If the company keeps its dividends high, the low expected profit may be transitory. If that is the case, the three good value ranks for Sales, Capital, and Dividends are reliable indicators for good stock price value, a low stock price. ...read more
Growth Strategy: First American Financial Growth Momentum negative
ANALYSIS: With an Obermatt Growth Rank of 15 (better than 15% compared with alternatives), First American Financial shows one of the most restricted growth dynamics in its industry. There is little momentum in this company. The Growth Rank is based on consolidating four value indicators, with three out of four indicators below-average for First American Financial. While Sales Growth ranks at 62, professionals currently expect the company to grow more than 62% of its competitors, while all other growth ranks are below the market median. Profit Growth has a rank of 15, which means that, currently, professionals expect the company to grow its profits less than 85% of its competitors, and Capital Growth has a low rank of 39. Historic stock returns were also below average with a current Stock Returns rank of 18 which means that the stock returns have recently been below 82% of alternative investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 15, is a sell recommendation for growth and momentum investors. If revenues are expected to increase, but all other growth indicators are negative, the company may be investing in future growth through means not visible in the balance sheet and thus not reflected in capital growth. The fact that Stock Returns have been below market doesn't mean that much, as it may be due to overly optimistic investor behavior in the past, which has been corrected to a more reasonable level recently. If that were the case, a positive Value Rank would be a reason to invest because the company is still expected to grow, while stock prices are now at a more reasonable level. ...read more
Safety Strategy: First American Financial Debt Financing Safety below-average
| SAFETY METRICS | July 18, 2024 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 44 |
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| REFINANCING | ||||||||
| REFINANCING | 2 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 23 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 34 |
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ANALYSIS: With an Obermatt Safety Rank of 34 (better than 34% compared with alternatives), the company First American Financial has financing practices on the riskier side, which means that their overall debt burden is above the industry average. This doesn't mean that the business of First American Financial is also risky, it only means that the company is on the riskier side in respect to bankruptcy in case things turn sour, assuming that public reporting is correct. The Safety Rank is based on consolidating three financing indicators, with all three metrics below average for First American Financial. Liquidity is at 23, meaning that the company generates less profit to service its debt than 77% of its competitors. This indicates that the company is on the riskier side when it comes to debt service. Even worse, Leverage is at a rank of 44, meaning the company has an above-average debt-to-equity ratio. It has more debt than 56% of its competitors. Finally, Refinancing is at a rank of 2 which means that the portion of the debt about to be refinanced is above average. It has more debt in the refinancing stage than 98% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 34 (worse than 66% compared with alternatives), First American Financial has a financing structure that is riskier than that of its competitors. This combination is rather dangerous in most situations. Only very promising companies with bright future outlooks and stellar reputations can operate with such risky financing.
Combined financial peformance: First American Financial Below-Average Financial Performance
| COMBINED PERFORMANCE | July 18, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 78 |
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| GROWTH | ||||||||
| GROWTH | 15 |
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| SAFETY | ||||||||
| SAFETY | 23 |
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| COMBINED | ||||||||
| COMBINED | 40 |
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ANALYSIS: With an Obermatt Combined Rank of 40 (worse than 60% compared with investment alternatives), First American Financial (Property & Casualty Insurance, USA) shares have somewhat below-average financial characteristics compared with similar stocks. Shares of First American Financial are a good value (attractively priced) with a consolidated Value Rank of 78 (better than 78% of alternatives) but show below-average growth (Growth Rank of 15), and are riskily financed (Safety Rank of 34), which means above-average debt burdens. ...read more
RECOMMENDATION: A Combined Rank of 40, is a hold recommendation based on First American Financial's financial characteristics. As the company First American Financial's key financial metrics exhibit good value (Obermatt Value Rank of 78) but low growth (Obermatt Growth Rank of 15) and risky financing practices (Obermatt Safety Rank of 34), it may be a risky investment, because debt in times of crises can make things worse. The good value, better than 78% of comparable companies, may indicate the company's future is challenging. If you believe that low growth is temporary or just due to a specific current event, you may conclude that the good value of the stock provides an attractive investment opportunity. ...read more
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