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First American Financial
(NYSE:FAF)
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Rating:74Outperform
Price Target:
$73.00
▼(-0.38% Downside)
Action:Reiterated
Date:10/23/26
FAF scores well primarily due to improving financial performance led by strong and consistent cash generation and improving profitability/ROE, plus an attractive valuation (low P/E and solid dividend yield). The score is held back by mixed-to-weak technical signals (negative MACD and trading below key longer-term moving averages) and an earnings outlook that is constructive on commercial/automation but tempered by expectations for flat 2027 revenue, weaker residential activity, and limited margin expansion.
Positive Factors
Commercial Growth
Record commercial performance provides an important counterweight to residential weakness and broadens FAF’s earnings base. Growth across multiple asset classes, higher order value, and a strong pipeline support durable market relevance and the potential for continued commercial expansion.
Negative Factors
Residential Weakness
Residential transaction activity remains a structural earnings headwind because higher mortgage rates and affordability constraints reduce purchase and refinancing volumes. Management’s expectation of declining residential revenue into 2027 limits near-term growth and increases reliance on commercial performance.
Read all positive and negative factors
Positive Factors
Negative Factors
Commercial Growth
Record commercial performance provides an important counterweight to residential weakness and broadens FAF’s earnings base. Growth across multiple asset classes, higher order value, and a strong pipeline support durable market relevance and the potential for continued commercial expansion.
Read all positive factors
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 (FAF) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$6.61B
Dividend Yield3.49%
Average Volume (3M)1.09M
Price to Earnings (P/E)9.1
Beta (1Y)0.68
Revenue Growth14.14%
EPS Growth52.69%
CountryUS
Employees19,102
SectorFinancial
Sector Strength70
IndustryInsurance - Specialty
Share Statistics
EPS (TTM)7.12
Shares Outstanding102,100,000
10 Day Avg. Volume1,197,592
30 Day Avg. Volume1,087,246
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 Cap1.22
Enterprise Value/Revenue1.87
Enterprise Value/Gross Profit2.46
Enterprise Value/Ebitda9.75
Forecast
1Y Price Target
$78.33Price Target Upside6.90% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering3
EPS Forecast (FY)6.9
Revenue Forecast (FY)$8.10B
First American Financial Business Overview & Revenue Model
Company Description
First American Financial Corporation (FAF) delivers financial services primarily through its diverse subsidiaries. The company's operations are divided into two main divisions: Title Insurance and Services, and Specialty Insurance. The Title Insur...
How the Company Makes Money
FAF primarily makes money by earning fees and premiums tied to real estate transactions, with revenue highly influenced by mortgage origination, refinancing, and home sale volumes.
1) Title insurance premiums: A major revenue stream is title insu...
First American Financial Earnings Call Summary
Earnings Call Date:Oct 21, 2026
(Q3-2026)
| % Change Since: |
Next Earnings Date:Feb 10, 2027
Earnings Call Sentiment Positive
The call was broadly positive, supported by record commercial performance, rising adjusted earnings, market-share gains, strong First American Trust and ServiceMac growth, and substantial progress on Endpoint and Sequoia. However, residential activity remains depressed, mortgage rates are elevated, Home Warranty profitability declined, expense and margin pressures remain, and management expects residential revenue to fall in 2027. The highlights significantly outweigh the lowlights, although the outlook remains dependent on continued commercial strength and successful technology execution.Positive Updates
Adjusted Earnings Per Share Increased
Third-quarter adjusted earnings per diluted share were $1.78, up 5% from the prior year. GAAP earnings were $1.72 per diluted share.
Negative Updates
Residential Purchase and Refinance Pressure
Purchase revenue decreased 3% because affordability constraints continued to weigh on existing home sales. Refinance revenue decreased 1%; refinance represented only 5% of direct revenue. Purchase closed orders declined 5%, while refinance average revenue per order declined 4%, partially offset by a 3% increase in refinance closed orders.
Read all updates
Q3-2026 Updates
Positive
Negative
Adjusted Earnings Per Share Increased
Third-quarter adjusted earnings per diluted share were $1.78, up 5% from the prior year. GAAP earnings were $1.72 per diluted share.
Read all positive updates
Company Guidance
Management’s outlook today is essentially flat for revenue year-over-year when comparing 2027 with full-year 2026, with commercial expected to have “some modest growth” and make 2027 a record year, while residential revenue is expected to be down next year; investment income is expected to continue to be strong, with the year-to-date net increase of 8% viewed as a good number for Q4, while expenses are expected to face normal inflationary pressures around personnel and other operating expenses. Management expects no margin expansion next year, with margins potentially stable or subject to “a little bit of pressure” and able to expand only if commercial exceeds expectations. The current environment is expected to remain “lower for longer” for residential originations into 2027, with the first three weeks of October showing open purchase orders down 8%, refinance down 35%, and commercial down 7%; commercial is expected to have a strong finish to the year. Loss rates are typically 4%-5% over the cycle, with the current policy year at 3.75%, and management expects it is likely that at some point in the near future it will either slow the release or cease the release of prior-year reserves. Endpoint and Sequoia are expected to process a majority of orders by the end of 2027, with a goal of automating approximately 80% of refinance transactions and 70% of purchase transactions in markets where First American maintains title plants.First American Financial Financial Statement Overview
Summary
Income Statement
74
Positive
Balance Sheet
78
Positive
Cash Flow
81
Very Positive
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 4.29B | 7.45B | 6.12B | 6.00B | 7.59B | 9.21B |
| Gross Profit | 3.26B | 7.12B | 3.76B | 3.71B | 4.28B | 5.64B |
| EBITDA | 824.10M | 1.20B | 522.40M | 595.40M | 586.20M | 1.87B |
| Net Income | 732.50M | 621.80M | 131.10M | 216.80M | 263.00M | 1.24B |
Balance Sheet | ||||||
| Total Assets | 17.98B | 16.23B | 14.91B | 16.80B | 14.96B | 16.45B |
| Cash, Cash Equivalents and Short-Term Investments | 12.47B | 1.39B | 1.80B | 3.66B | 1.29B | 1.29B |
| Total Debt | 2.55B | 1.91B | 2.42B | 2.19B | 2.28B | 2.46B |
| Total Liabilities | 12.57B | 10.73B | 9.98B | 11.94B | 10.27B | 10.67B |
| Stockholders Equity | 5.39B | 5.50B | 4.91B | 4.85B | 4.66B | 5.77B |
Cash Flow | ||||||
| Free Cash Flow | 805.80M | 762.50M | 679.20M | 90.90M | 520.00M | 1.06B |
| Operating Cash Flow | 969.50M | 950.80M | 897.50M | 354.30M | 780.00M | 1.22B |
| Investing Cash Flow | -2.12B | -1.46B | -458.70M | 599.50M | -395.00M | -3.39B |
| Financing Cash Flow | -32.70M | 164.40M | -2.31B | 1.42B | -376.00M | 2.13B |
First American Financial Technical Analysis
Neutral
73.28
Price Trends
68.04
Negative
68.92
Negative
66.39
Negative
Market Momentum
-0.68
Negative
48.12
Neutral
73.53
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For FAF, the sentiment is Neutral. The current price of 73.28 is above the 20-day moving average (MA) of 63.20, above the 50-day MA of 68.04, and above the 200-day MA of 66.39, indicating a neutral trend. The MACD of -0.68 indicates Negative momentum. The RSI at 48.12 is Neutral, neither overbought nor oversold. The STOCH value of 73.53 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral 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 |
|---|---|---|---|---|---|---|---|
84 Outperform | $6.58B | 10.04 | 12.76% | 1.88% | 2.49% | 7.73% | |
78 Outperform | $6.00B | 9.24 | 11.91% | 2.04% | 4.47% | 4.26% | |
74 Outperform | $6.61B | 9.09 | 13.33% | 3.49% | 14.14% | 52.69% | |
74 Outperform | $4.73B | 9.03 | 11.26% | 2.85% | 27.93% | -2.18% | |
72 Outperform | $5.91B | 8.97 | 13.90% | 2.15% | -1.88% | 4.83% | |
69 Neutral | $10.85B | 14.04 | 10.13% | 5.14% | 12.68% | -27.30% | |
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% |
* Financial Sector Average
FAF
First American Financial
64.72
3.00
4.86%
FNF
Fidelity National Financial
40.44
-12.17
-23.14%
MTG
MGIC Investment
28.80
2.40
9.11%
RDN
Radian Group
35.75
3.09
9.45%
ESNT
Essent Group
66.80
7.73
13.08%
ACT
Enact Holdings
47.89
12.86
36.72%
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.