FAF - First American Financial: Lack Of Near-Term Growth Leaves Shares With Limited Upside

2024-05-16 02:35:49 ET

Summary

• First American Financial's shares have underperformed due to high interest rates slowing housing transactions, negatively impacting the title insurance business.
• The company's Q1 financial results showed a decline in volume and pre-tax income in its title insurance unit.
• Despite some nascent signs of growth in the housing market, the overall outlook for FAF remains muted, making it an unappealing investment at 14x earnings.

Shares of First American Financial ( FAF ) have been a poor performer over the past year, missing out on the equity market’s rally. High rates have slowed housing transactions, a negative for the title insurance business. I last covered FAF in December , saying shares were likely to be “dead money,” rating them a hold. In hindsight, I could have justified a sell rating with shares subsequently falling 10% while the market rose by 11%. Given this underperformance and with new financial data, now is an opportune time to revisit FAF. I would remain on the sideline....

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