FAF
First American Financial Corp
Finance/Real Estate
03/09/2021
Presented
| Date | 03/03/2021 |
| Price | $52.47 |
| Market Cap | $5.76B |
| Ent Value | $8.34B |
| P/E Ratio | 8.57x |
| Book Value | $44.49 |
| Div Yield | 3.36% |
| Shares O/S | 109.85M |
| Ave Daily Vol | 723,026 |
| Short Int | 1.76% |
Current
| Price | $66.58 |
| Market Cap | $6.85B |
| First American Financial Corp. operates as an insurance company. It provides title insurance and settlement services to the real estate and mortgage industries. The company operates its business through the following segments: Title Insurance & Services and Specialty Insurance. The Title Insurance & Services segment provides title insurance, escrow, closing services and similar or related financial services domestically and internationally in connection with residential and commercial real estate transactions. It also maintains, manages and provides access to title plant records and images and provides banking, trust and investment advisory services. The Specialty Insurance segment issues property & casualty insurance policies and sells home warranty products. It also provides title plant management services, which include title and other real property records and images, valuation products and services, home warranty products, property and casualty insurance and banking, trust and investment advisory services. First American Financial was founded in January, 2008 and is headquartered in Santa Ana, CA. |
Publicly traded companies mentioned herein: Athene Holding Ltd (ATH), Fidelity National Financial Inc (FNF), First American Financial Corp (FAF)
Highlights
The presenter is long shares of First American Financial Corp (FAF), which is the second largest title insurance company with a 25.2% market share. FAF has historically been a good business, generating a mid-teen% ROE and 18% – 20% ROTE with minimal credit losses. The stock sold off at the beginning of COVID-19 from a $67 share price to $30 due to concerns of a housing crisis before rebounding to ~$50 in late spring. At its current $52 per share, FAF trades at ~9x his $6 2021 EPS estimate while many other financials are now trading at mid-teen earnings multiples (roughly in line with FAF’s historical valuation) based on earnings growth optimism. This discount can be attributed to the market’s concern that refinancing volumes will plummet. The presenter considers this a legitimate concern but is confident that the company’s other levers will keep earnings resilient, and applies a ~15x multiple to his $6.50 2022 EPS projection to reach a mid-$90 price target.
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