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RISK CONCERN
Investment Strategy, Risk Analysis, and Insights by Chartered Professionals
First American Financial Corporation (XNYS:FAF) In-Depth Stock/Fundamental/Options Analysis Today
Primary Facts
FAF
Name:
FIRST AMERICAN FINANCIAL CORPORATION (XNYS:FAF)
Sector:
- 3000.00K
Industry:
Insurance�Specialty
CEO:
Mr. Dennis Gilmore
Total Employees:
22,233
Our Technological Advancement Rating
Our Rating:
-
-
ANALYSIS OF ALL CRITICAL FACTORS & RISKS RELATED TO THE STOCK & FUNDAMENTAL/LONG-TERM ANALYSIS OF FIRST AMERICAN FINANCIAL CORPORATION(FAF) AS PER DATA ANALYSIS OF LAST 3 YEARS AND COMPARISON WITH COMPETITORS/PEERS, AND INSURANCE�SPECIALTY INDUSTRY. DATE: 07/09/2022
Primary Targets/Price Insights
Previous Close ($) :
53.19
One Month Price Target:
$53.56
Six Month Price Target :
$55.38
Likely Price in One Year's Time:
Ticker:
$57.58
Likely Trading Range Today Under (Normal Volatility)
$52.98
Price Upper limit ($) :
$53.41
Price Lower limit ($) :
Crash Risk Prep/Key Price Levels (High Volatility/Risk)
Price, as per data analysis, isn't likely to fall below:
Today:
$50.55
This week:
$47.29
This month :
$41.4
Other Primary facts
Market Cap:
5.54B
Market Cap Classification:
Mid Cap
Number of Shares
IPO Date:
104.16M
Best/Worst Daily Performance (Last 3+ Years)
Highest Daily Appreciation:
12.93%
-21.01%
Worst Daily Decline:
Our Options Trading Entry Points
Iron Condor entry points for options expiring in 1 week's time
Low risk (<2%) entry points
Buy Call:
Sell Call:
Buy Put:
Sell Put:
$65.43
$59.86
$40.95
$46.52
Medium risk (<10%) entry points
Buy Call
Sell Call
$58.05
Buy Put:
Sell Put:
$56.86
$48.32
$49.52
These entry points can be used for other strategies, such as butterflies, straddles, etc.
Risk-Adjusted returns (Sharpe Ratio) of
FAF
Sharpe Ratio:
-0.05%
Comparison:
FAF, is amongst the top 40% stocks with lowest risk-adjusted returns
Sharpe ratio is -125.53% lower than the industry
& is -102.39% lower than the market/S&P 500 average
Average Returns/Yield of
FAF
Daily returns:
0.01%
Weekly returns:
0.04%
Monthly returns:
0.15%
Yearly returns:
3.76%
Comparison of returns:
Average annual returns/yield (last 3 years) is -51.95% below industry average
Classification:
FAF, is amongst the top 40% lowest yielding stocks in terms of daily returns
Results of T-Test of Returns:
0.5
Statistical test of Returns:
FAF has yielded returns statistically similar to the market
Volatility (measured by Standard Deviation)
Daily Volatility:
2.42%
Weekly Volatility:
5.41%
Monthly Volatility:
10.81%
Yearly Volatility:
37.45%
Volitlilty of last five days (Measured by Standard Deviation)
Average Volatility of this Week:
0.90%
Volatility in last five trading days has been -62.70% below long-term volatility
Value at Risk Analysis (VaR)
Daily VaR:
-4.96%
Weekly VaR:
-11.09%
Monthly VaR:
-22.17%
How Much Can the price of
FAF
Decline in a Recession?
Likely price decline in a recession:
Base case (decline):
-20%
Worst case (decline):
-76.81%
This translates to price declining to:
$42.81
This translates to price declining to:
$12.34
Severe Crash Probability
Risk of crash in next 6/12 months: Low (<25%)
What is Value at Risk (VaR)?
Risk Fundamentals
FAF is a 56.49% riskier investment compared to the market/S&P 500 & is 34.06% riskier than Nasdaq (IXIC)
Risk (measured by volatility) is -11.73% below industry average
Overall, it is amongst the top 50% most risky stocks
Beta Examination of
FAF
Beta in relation to market/S&P 500--1.23
Expected beta in 1 year's time:
0.991
Expected beta in 3 year's time:
1.401
Unlevered (debt free) Beta:
1.927
Beta in relation to Nasdaq (XNAS):
0.717
Beta in relation to all global stocks::
0.685
Beta Comparison & Analysis
Beta of competitors/peers::
0.855
Beta is 43.47% higher than peers
Average Industry Beta:
1.047
Beta is 17.20% above industry average
Sustainable Growth Rate Analysis
Sustainable growth rate for this stock/firm:
19.80%
Sustainable growth rate is 20.43% above industry average
Alpha provided | Alpha Analysis
Alpha provided:
-0.097
Alpha is 48.61% above industry average alpha yield
Alpha is -620% below the market average
Analysis of Cost of Capital of
FAF
Equity cost of capital:
0.116
Equity cost of capital is 11.95% above industry mean WACC
Unlevered (without debt) cost of capital:
18.14%
Before-tax cost of debt:
-
After-tax cost of debt:
-
Overall debt rating:
-
Weighted average cost of capital (WACC):
-
-
Key Per-Share Metrics & Analysis
Revenue per share:
$88.54
Revenue growth rate per share of (3Y):
1.03
Annual revenue growth rate is 89.38% above the industry average
EPS:
$9.93
Expected Annual growth rate of EPS (3Y):
21.18%
Expected future EPS growth rate is 179.85% higher than the Insurance�Specialty industry
Free cash flow (FCF) per share:
$7.59
Balance sheet equity growth per share: 21.12%
Equity growth rate per share is 153.77% higher than the industry
Debt per share
$0.00
EBITDA per share
$15.88
Valuation Analysis Today of
FAF
P/E Ratio:
6.47
P/E Ratio of Competitors/Peers:
11.05
P/E ratio is -41.42% lower than main peers & is -7.92% lower than the industry
Stock price/value with industry average P/E ratio: $69.78
FAF is -23.78% undervalued if valued using industry average P/E ratio
Share value as per dividend discount (DDM) model: $38.88
Present value of the expected future dividends only: $21.83
P/S (Price to Sales ratio):
0.6
Price to sales ratio is -78.38% below the industry mean
P/B (Price to book value ratio):
1.03
Price to free cash flow: 7.01
Price to free cash flow ratio is -25.14% lower than the industry
Net income growth rate (3Y):
165.45%
Net income growth rate is 26.65% higher than the average industry net income growth rate
Dividend Analysis
Dividend payout rate: 5.07%
Dividend yeild: 3.84%
Previous Dividend: $0.51
Previous adjusted dividend: $0.51
Previous Dividend: $2.04
Expected next dividend best case: $0.54
Expected next dividend worst case: $0.48
Average dividend payment (long-term): $0.47
Average dividend increase/decrease (growth rate) % per period: 2.02%
Expected next dividend payment date: 13/09/2022
Expected next dividend record date: 09/06/2022
-
Previous dividend payment date: 15/06/2022
Previous dividend record date: 06/08/2022
-
Dividend History:
2022-06-07--$0.51
2021-12-07--$0.51
2021-06-07--$0.46
2022-03-07--$0.51
2021-09-07--$0.51
2021-03-05--$0.46
Dividend growth rate is -295.44% lower than the industry average
In-depth Debt & Leverage Analysis
Debt to equity ratio:
-47.85%
Net debt to equity ratio:
-31.77%
Debt to assets ratio:
-91.74%
Net debt to assets ratio:
-10.31%
Debt-to-asset ratio is -365.03% below industry average
Ability to repay debt:
Interest coverage ratio:
21.91
Interest coverage ratio is 517.79% more than industry average
Looking forward:
Debt growth rate:
34.97%
Annual debt growth is -1037% lower than industry average debt growth rate
-
Analysis of Key Statistics
Correlation of price movement with the market:
0.624
Statistical significance of correlation:
FAF has a statistically significant correlation with the market
Average Correlation of the industry with the market:
0.587
Stock price is 6.33% more correlated with the market, compared to the industry average correlation
R Squared (percentage of price movement explained by movement of the market):
0.587
Correlation of price movement with Nasdaq (^IXIC):
0.041
Covariance of price movement with the market:
0.057
Kurtosis
14.872
Returns have severe fat-tails (leptokurtic), i.e., returns considerably higher or lower than the mean returns are considerably more likely, compared to assets with normally distributed returns
Skewness of returns:
-1.107
Returns are left (negative) skewed; mean returns are lower than median and mode returns
Fundamental Analysis & Dupont Analysis of
FAF
Gross Profit Margin Ratio:
-
Operating Profit Margin Ratio:
3.61%
Operating profit margin is -88.58% lower than the industry
Net Profit Margin Ratio:
-
Effective Tax Rate:
24.11%
Effective tax rate is 10.59% higher than the industry
Dupont Method
Net Profit Margin
Return on Equity Ratio (ROE):
×
ROA
=
×
20.61%
Return on equity (ROE) is -4.23% lower than the industry
Financial Leverage
Asset Turnover Ratio (ROA):
6.69%
Return on assets (ROA) is 5.76% higher than the industry
Financial Leverage:
0.5x
Current Ratio:
0
-
Cash Conversion Cycle (days):
0
-
The remaining useful life of property plant & equipment is: 8.0 years
Stock based compensation to net income ratio:
3.89%
In-depth Efficiency Analysis
Revenue generated per employee:
414.8K
Each employee generates -59% less revenue than industry average revenue per employee
EBITDA generated per employee:
74.4K
Each employee generates -87% less EBITDA than industry average revenue per employee
Profit generated per employee:
49.7K
Each employee generates -87% less net income/profit than industry average revenue per employee
Free cash flow (FCF) generated per employee:
- 0.1K
Each employee generates -100% less free cash flow than industry average revenue per employee
Assets/Capital per employee
0.0K
Each employee generates -100% less free cash flow than industry average revenue per employee
Research & Development (R&D) Analysis
-
-
Competitors/Peer firms of
FAF
Banco Santander-Chile (XNYS:BSAC)
CULLEN/FROST BANKERS, INC. (XNYS:CFR)
Banco Santander Mexico SA Institucion de Banca Multiple Grupo Financiero Santander Mexico (XNYS:BSMX)
RNR-PF
VOYA-PB
VOYA FINANCIAL, INC. (XNYS:VOYA)
RNR-PE
ASSURANT, INC. (XNYS:AIZ)
BANK OF CHILE (XNYS:BCH)
Current Analyst Ratings
Strong buy�4%
Buy�8%
Hold�17%
Sell�0%
Strong sell�0%
Overall analyst sentiment is: Hold
Income Statement
Period:
TTM
Date:
3/31/22
Revenue:
9.22B
Cost of Revenue:
Gross Profit:
R&D Expense
General & Admin Expenses:
Selling, General & Admin Expenses
Sales and Marketing Expenses
Other Expenses :
Operating Expenses :
Cost & Expenses :
Interest Income:
Interest Expenses:
Depreciation & Amortization:
EBITDA:
Operating Income:
Other Income Expenses:
Income Before Tax:
Income Tax Expense:
Net Income:
Balance Sheet
Date:
Calendar Year:
Period:
Cash & Cash Equivalents:
Short Term Investments:
Cash & Short Term Investments:
Net Receivables:
Inventory:
Other Current Assets:
Total Current Assets:
PP&E:
Goodwill:
Intangible Assets:
Long Term Investments:
Tax Assets:
Other Non-Current Assets:
Total Non-Current Assets:
Other Assets:
Total Assets:
Accounts Payable:
Short Term Debt:
Tax Payables:
Deferred Revenue:
Other Current Liabilities:
Total Current Liabilities:
Long Term Debt:
Other Non-Current Liabilities:
Total Non Current Liabilities:
Other Liabilities:
Total Liabilities:
Common Stock:
Retained Earnings:
Accumulated Other Comprehensive Loss:
Other Total Stockholders' Equity:
Total Stockholders' Equity:
Total Liabilities and Stockholders' Equity:
Total Investments:
Total Debt:
Net Debt:
-
-
-
1.81B
1.81B
-
-
-
-
75.49M
119.70M
1.65B
-
1.11B
1.47B
353.44M
1.11B
Statement of Cash Flow
Date:
Period:
41.00M
Differed Income Tax :
-
Stock Based Compensation :
43.00M
Change in Working Capital :
- 668000.00K
Accounts Receivables:
6.00M
Other Working Capital:
2.06B
Other Non-Cash Items:
526.00M
Net Cash Provided by Operating Activities:
40.00M
Investments in PP&E:
-
Net Acquisitions:
83.00M
Purchases of Investments:
- 742000.00K
Sales/Maturities of Investments:
Other Investing Activities:
Net Cash Used for Investing Activities:
Debt Repayment:
Common Stock Issued:
Common Stock Repurchased:
Dividend Paid:
Other Financing Activities:
Net Cash Used Provided by Financing Activities:
Effect of FOREX on Changes in Cash:
Net Changes in Cash:
Cash at End of Period:
Cash at Beginning of Period:
Operating Cash Flow:
Capital Expenditure:
Free Cash Flow (FCF):
3/31/22
2022
Q1
1.70B
-
1.70B
-
-
-
-
-
-
-
-
-
-
-
16.53B
16.53B
-
-
-
-
-
-
-
-
-
11.16B
11.16B
-
-
- 461000.0K
-
March 31, 2022 at 6:00:00 AM
5.85B
5.36B
16.53B
10.09B
-
- 1704000.0K
83.00M
469.00M
- 107000.00K
-
-
- 108000.00K
- 56000.00K
707.00M
543.00M
-
476.00M
1.70B
1.23B
40.00M
- 43000.00K
- 3000.00K
Our Proprietary Portfolio Rating
Our Rating:
-
Price Forecast/Expected Price in Next 5 Years of
FAF
2023
2024
2025
2026
2027
$57.87
$96.00
$103.92
$112.48
$121.76