FAF Stock Trades Above 50-Day SMA: What Should Investors Do?

Core Viewpoint - First American Financial Corporation (FAF) is experiencing a short-term bullish trend as it trades above its 50-day simple moving average, indicating potential upward momentum in its stock price [1][3]. Company Overview - FAF has a market capitalization of $6.52 billion and an average trading volume of 0.4 million shares over the last three months. The company has a strong track record, beating earnings estimates in three of the last four quarters with an average beat of 5.56% [2]. Valuation Metrics - FAF shares are currently trading at a price-to-book multiple of 1.36, which is lower than the industry average of 1.55, suggesting that the shares are undervalued and present a better entry point for investors. The company has a Value Score of B [4]. Growth Projections - The Zacks Consensus Estimate projects a 20.6% year-over-year increase in FAF's earnings per share for 2025, with revenues expected to reach $7.14 billion, reflecting a 16.5% improvement. For 2026, earnings per share and revenues are estimated to increase by 10.2% and 10.4%, respectively [6][7]. Price Performance - Over the past year, FAF shares have gained 9.8%, although this underperformed the industry growth of 24.5%, the Finance sector's return of 20.6%, and the S&P 500's appreciation of 15.7% [9]. Market Drivers - Increased demand for first-time home purchases among millennials, along with an improving economy and labor market, is expected to drive home price appreciation, benefiting FAF. The company is well-positioned for long-term growth due to its leadership in title data, strong distribution relationships, prudent underwriting, and ongoing technology investments [10]. Revenue Drivers - The growth in direct premiums, escrow fees, and title agent premiums is anticipated to continue driving FAF's top line. The company is focused on enhancing its product offerings, strengthening its core business, and expanding its valuation and data services [11]. Shareholder Returns - FAF has a history of returning wealth to shareholders through dividend increases and share buybacks, with dividends showing an 8.2% compound annual growth rate (CAGR) from 2016 to 2024, yielding 3.4%, which outperforms the industry average of 0.2% [12]. Final Assessment - The combination of increased demand for home purchases, a favorable rate environment, and strong commercial business positions FAF positively. The solid dividend yield further enhances its attractiveness as an investment [13][14].