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FAF vs. WRB: Which Stock Should Value Investors Buy Now?

Zacks

Investors interested in Insurance – Property and Casualty stocks are likely familiar with First American Financial (FAF) and W.R. Berkley (WRB). But which of these two stocks is more attractive to value investors? We’ll need to take a closer look to find out.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

First American Financial has a Zacks Rank of #1 (Strong Buy), while W.R. Berkley has a Zacks Rank of #2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that FAF is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.


The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

FAF currently has a forward P/E ratio of 11.77, while WRB has a forward P/E of 25.57. We also note that FAF has a PEG ratio of 1.07. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company’s expected earnings growth rate. WRB currently has a PEG ratio of 2.84.

Another notable valuation metric for FAF is its P/B ratio of 1.57. The P/B ratio is used to compare a stock’s market value with its book value, which is defined as total assets minus total liabilities. For comparison, WRB has a P/B of 2.19.

These metrics, and several others, help FAF earn a Value grade of A, while WRB has been given a Value grade of C.

FAF stands above WRB thanks to its solid earnings outlook, and based on these valuation figures, we also feel that FAF is the superior value option right now.


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Zacks Investment Research
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