December 7, 2023
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 December 07, 2023 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 December 07, 2023.
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 | December 7, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 80 |
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| GROWTH | ||||||||
| GROWTH | 33 |
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| SAFETY | ||||||||
| SAFETY | 34 |
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| SENTIMENT | ||||||||
| SENTIMENT | 24 |
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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 80, 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 80% of alternative stocks in the same industry. All other consolidated ranks are below average. The consolidated Growth Rank has a low rank of 33, 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 76% of alternative investment opportunities, reflected in the consolidated Sentiment Rank of 24. ...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 80. All other ranks are below average, so proceed with caution. The company has below-average growth expectations (Growth Rank of 33), 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 24) 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 24 (better than 24% 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 53 (better than 53% 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 28, 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 18, meaning that professional investors hold less stock in this company than in 82% of alternative investment opportunities. Pros tend to invest in other companies. Even worse, Market Pulse has a low rank of 41, which means that the current professional news and professional social networks are critical of this company (more negative news than for 59% of competitors). ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 24 (less encouraging than 76% 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 80 (better than 80% 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 that are all above average for First American Financial. Price-to-Sales is 57 which means that the stock price compared with what market professionals expect for future sales is lower than for 57% of comparable companies, indicating a good value for First American Financial's revenue size. The same is valid for expected Price-to-Profits, more favorable than for 55% of alternatives, and this is also true for the Price-to-Book capital ratio (also referred to as market-to-book ratio) with a Price-to-Capital Rank of 63. Compared with other companies in the same industry, dividend yields of First American Financial are expected to be higher than for 86% of all competitors (a Dividend Yield rank of 86). ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 80, is a buy recommendation based on First American Financial's stock price compared with the company's operational size and dividend yields. Since all value metrics are above the industry average, there is no objection to investing in First American Financial based on its detailed value metrics.
Growth Strategy: First American Financial Growth Momentum low
ANALYSIS: With an Obermatt Growth Rank of 33 (better than 33% compared with alternatives), First American Financial shows a below-average growth dynamic in its industry. There is limited momentum in this company. The Growth Rank is based on consolidating four value indicators, with half of the indicators below and half above average for First American Financial. Capital Growth has a rank of 53, which means that currently professionals expect the company to grow its invested capital more than 13% of its competitors. Investors welcomed this, visible in the Stock Returns rank of 59 (above 59% of alternative investments). But Sales Growth has only a rank of 41, which means that, currently, professionals expect the company to grow less than 59% of its competitors, and Profit Growth is also low at a rank of 13. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 33, is a hold recommendation for growth and momentum investors. This is an ambiguous picture. Revenue growth and capital growth are strong, but the growth in profit, which seems good, can also be an indication that growth momentum may be negative. The fact that stock returns have been above average doesn't help much, as stock returns are less reliable in showing a company’s future growth potential. Prices may perform well for the simple reason that investors were too pessimistic in the past and are now correcting their opinions and moving the stock price to a more reasonable level. As the growth picture is mixed for First American Financial, investors may want to look at value and sentiment indicators for a well-rounded picture of this stock. ...read more
Safety Strategy: First American Financial Debt Financing Safety below-average
| SAFETY METRICS | December 7, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 41 |
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| REFINANCING | ||||||||
| REFINANCING | 2 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 47 |
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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 47, meaning that the company generates less profit to service its debt than 53% 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 41, meaning the company has an above-average debt-to-equity ratio. It has more debt than 59% 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 | December 7, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 80 |
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| GROWTH | ||||||||
| GROWTH | 33 |
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| SAFETY | ||||||||
| SAFETY | 47 |
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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 80 (better than 80% of alternatives) but show below-average growth (Growth Rank of 33), 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 80) but low growth (Obermatt Growth Rank of 33) 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 80% 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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