Are Investors Undervaluing First American Financial (FAF) Right Now?

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

First American Financial (FAF) is a stock many investors are watching right now. FAF is currently holding a Zacks Rank #2 (Buy) and a Value grade of A. The stock has a Forward P/E ratio of 11.43. This compares to its industry's average Forward P/E of 27.32. Over the last 12 months, FAF's Forward P/E has been as high as 15.32 and as low as 9.75, with a median of 11.61.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a preferred metric because revenue can't really be manipulated, so sales are often a truer performance indicator. FAF has a P/S ratio of 0.95. This compares to its industry's average P/S of 1.33.

Universal Insurance Holdings (UVE) may be another strong Insurance - Property and Casualty stock to add to your shortlist. UVE is a Zacks Rank of #2 (Buy) stock with a Value grade of A.

Furthermore, Universal Insurance Holdings holds a P/B ratio of 1.58 and its industry's price-to-book ratio is 16.98. UVE's P/B has been as high as 1.89, as low as 1.19, with a median of 1.54 over the past 12 months.

These are only a few of the key metrics included in First American Financial and Universal Insurance Holdings strong Value grade, but they help show that the stocks are likely undervalued right now. When factoring in the strength of its earnings outlook, FAF and UVE look like an impressive value stock at the moment.

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This article originally published on Zacks Investment Research (zacks.com).

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