3 Reasons FAF is Risky and 1 Stock to Buy Instead

October 10, 2025 at 00:02 AM EDT

FAF Cover Image

First American Financial has been treading water for the past six months, recording a small loss of 0.5% while holding steady at $59.67. The stock also fell short of the S&P 500’s 27.9% gain during that period.

Is now the time to buy First American Financial, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free for active Edge members.

Why Do We Think First American Financial Will Underperform?

We're swiping left on First American Financial for now. Here are three reasons we avoid FAF and a stock we'd rather own.

1. Net Premiums Earned Hit a Plateau

When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are therefore gross premiums less what’s ceded to reinsurers as a risk mitigation and transfer strategy.

First American Financial’s net premiums earned was flat over the last two years, much worse than the broader insurance industry and in line with its total revenue.

First American Financial Trailing 12-Month Net Premiums Earned

3. EPS Growth Has Stalled

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

First American Financial’s EPS was flat over the last five years, just like its revenue. This performance was underwhelming across the board.

First American Financial Trailing 12-Month EPS (Non-GAAP)

Final Judgment

First American Financial falls short of our quality standards. With its shares underperforming the market lately, the stock trades at 1.1× forward P/B (or $59.67 per share). At this valuation, there’s a lot of good news priced in - we think there are better stocks to buy right now. We’d suggest looking at one of our top digital advertising picks.

Stocks We Would Buy Instead of First American Financial

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