Value
8.4/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 8.8 |
| P/S | 9.7 |
| EV/EBITDA | 8.2 |
| Fwd P/E | 9.3 |
| PEG | 10.0 |
| Analyst target | 5.0 |
- ▸Forward P/E: 9.9x
- ▸PEG: 0.14
- ▸Attractively valued
FAF · Why this verdict
Why First American Corporation (New (FAF) is rated BUY WAIT
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictBUY WAIT
Overall score6.9/10
ConfidenceMEDIUM
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
First American offers a rare combination of quality-franchise characteristics — wide economic moat, 254% free-cash-flow-to-net-income conversion, and four consecutive earnings beats averaging roughly 23% positive surprise — at a forward multiple of 9.1 times earnings with a PEG ratio of 0.13; the only near-term constraint is momentum sitting just below the threshold for a clean entry, which argues for patient accumulation on pullbacks rather than aggressive sizing at current levels.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The stock trades at a forward multiple of 9.1 times earnings with a PEG ratio of 0.13, while carrying wide-economic-moat characteristics and compounder-quality return dynamics; that combination — franchise strength at a steep discount to earnings growth — presents a compelling value case relative to sector peers. Valuation breakdown | Forward price-to-earnings multiple expands above 12 times within 12 months as the market re-rates the franchise. | Tripped↓Deteriorating |
| CounterThe low PEG may reflect the market pricing in specialty insurance cycle risk; if the housing or title market deteriorates, the earnings estimate underpinning the current multiple could contract materially and the apparent cheapness would evaporate. | ||
The company has beaten consensus estimates in each of the last four quarters, with an average positive surprise of approximately 23%, a record consistent with management consistently under-promising and over-delivering; that cadence raises above-average confidence in the probability of another beat at the next report. Earnings | Average quarterly EPS surprise remains above 10% for the next four consecutive quarters. | →Stable |
| CounterWith lighter-than-average analyst coverage, the beat streak may partly reflect underpopulated estimates rather than structural earnings power; as coverage broadens, estimates could tighten and compress the typical beat margin. | ||
Free cash flow is approximately 254% of net income, indicating the business generates far more cash than accounting earnings suggest and supporting a high quality-of-earnings assessment; this surplus underpins dividend sustainability and gives management ample flexibility to fund growth without external capital. Quality breakdown | Free cash flow remains above 150% of net income for the next four consecutive quarters. | →Stable |
| CounterA conversion ratio well above 100% often reflects working-capital timing benefits or non-cash accounting differences that can reverse; if those factors normalize, reported cash generation may converge sharply downward toward net income. | ||
The momentum score of 4.2 sits just below the 4.5 minimum required for a clean entry signal, and volume trends show distribution rather than accumulation; this marginal gap means the technical setup is one catalyst away from clearing — or one disappointment away from a more meaningful pullback. Momentum breakdown | Volume trends reverse from distribution to net accumulation sustained over 4 consecutive weeks. | ↑Improving |
| CounterA score of 4.2 is barely below the 4.5 threshold — within normal consolidation range for a name where analysts are targeting roughly 30% additional upside — and the overall fundamental thesis is undimmed by the soft near-term technical posture. | ||
The stock trades at a forward multiple of 9.1 times earnings with a PEG ratio of 0.13, while carrying wide-economic-moat characteristics and compounder-quality return dynamics; that combination — franchise strength at a steep discount to earnings growth — presents a compelling value case relative to sector peers.
Tripped↓DeterioratingValuation breakdown
- Expectation
- Forward price-to-earnings multiple expands above 12 times within 12 months as the market re-rates the franchise.
CounterThe low PEG may reflect the market pricing in specialty insurance cycle risk; if the housing or title market deteriorates, the earnings estimate underpinning the current multiple could contract materially and the apparent cheapness would evaporate.
The company has beaten consensus estimates in each of the last four quarters, with an average positive surprise of approximately 23%, a record consistent with management consistently under-promising and over-delivering; that cadence raises above-average confidence in the probability of another beat at the next report.
→StableEarnings
- Expectation
- Average quarterly EPS surprise remains above 10% for the next four consecutive quarters.
CounterWith lighter-than-average analyst coverage, the beat streak may partly reflect underpopulated estimates rather than structural earnings power; as coverage broadens, estimates could tighten and compress the typical beat margin.
Free cash flow is approximately 254% of net income, indicating the business generates far more cash than accounting earnings suggest and supporting a high quality-of-earnings assessment; this surplus underpins dividend sustainability and gives management ample flexibility to fund growth without external capital.
→StableQuality breakdown
- Expectation
- Free cash flow remains above 150% of net income for the next four consecutive quarters.
CounterA conversion ratio well above 100% often reflects working-capital timing benefits or non-cash accounting differences that can reverse; if those factors normalize, reported cash generation may converge sharply downward toward net income.
The momentum score of 4.2 sits just below the 4.5 minimum required for a clean entry signal, and volume trends show distribution rather than accumulation; this marginal gap means the technical setup is one catalyst away from clearing — or one disappointment away from a more meaningful pullback.
↑ImprovingMomentum breakdown
- Expectation
- Volume trends reverse from distribution to net accumulation sustained over 4 consecutive weeks.
CounterA score of 4.2 is barely below the 4.5 threshold — within normal consolidation range for a name where analysts are targeting roughly 30% additional upside — and the overall fundamental thesis is undimmed by the soft near-term technical posture.
Per-dimension breakdown
Quality
5.8/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 4.3 |
| ROA | 2.6 |
| Gross margin | 8.8 |
| Op margin | 4.4 |
| Net margin | 4.4 |
| Current ratio | 1.6 |
| FCF quality | 10.0 |
| Moat | 7.6 |
| Piotroski F | 8.9 |
- ▸Excellent cash conversion: 254% FCF/NI
- ▸Wide economic moat
- ▸Compounder quality: strong returns + growth
- ▸Strong Piotroski F-Score: 8/9
Growth
8.3/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 6.6 |
| EPS growth | 10.0 |
Momentum
7.1/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.0 |
| MACD | 9.9 |
| OBV | 9.9 |
| MA position | 9.0 |
| Volume | 1.5 |
- ▸Volume accumulation (rising OBV)
- ▸Above 200-day MA
Sentiment
6.7/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 5.0 |
| Analyst rating | 7.3 |
| Price target | 7.7 |
- ▸Light analyst coverage (5.0) — signal dampened
Insider
7.3/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 10.0 |
| notable moves | 7.0 |
- ▸Insider selling (low materiality) — $867,623 (0.012% of mkt cap)
- ▸Institutions accumulating
Peer rank
4.6/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 5.8 |
| quality rank | 3.6 |
| growth rank | 7.5 |
Technical
4.7/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 2.3 |
| support resistance | 2.2 |
| 52w position | 9.5 |
Risk (lower is worse)
6.6/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 6.3 |
| days to cover | 5.1 |
| volatility | 6.3 |
| put call | 10.0 |
| implied vol | 6.2 |
| beta | 6.0 |
| debt equity | 7.9 |
| news risk | 5.0 |
Catalyst
7.5/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 10.0 |
| dividend safety | 6.8 |
| news activity | 8.0 |
- ▸Perfect beat streak: 4Q
- ▸Earnings in 0 days
- ▸Dividend: 3.1%
How the verdict was assembled
Engine trigger
Earnings in 0 days. Wait until post-earnings.
Engine technical detail
verdict_path:
L3:NEWS_BLOCK|ENTRY_STICKY:WITHIN_BANDPassed (5)
- MOMENTUM:7.1>=5.5
- INSIDER:OK
- 8K:CLEAN
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (2)
- ASYMMETRY:0.5<1.5@spot
- EARNINGS_PROXIMITY:0d<=7d
Warning (0)
none
Reward-to-Risk
0.46
Upside
+4.2%
Downside
9.2%
Sizing output
STARTER
SetupBreakout — Golden cross, above all MAs, RSI 62, MACD bullish
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
A recent news event triggered an L3 news-block on the verdict path. Trigger: Earnings in 0 days. Wait until post-earnings. The 10-dimension scores remain Value at 8.4 (strongest), but ASYMMETRY:0.5<1.5@spot also fails — the news block is the proximate trigger, not the sole driver.
The strongest dimensions are Value at 8.4, Growth at 8.3, and Catalyst at 7.5; the weakest are Peer rank at 4.6, Technical at 4.7, and Quality at 5.8. The V9 engine flagged 2 failed gates, producing an asymmetric reward-to-risk of 0.46 and an engine sizing output of STARTER.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Earnings Beat Streak
Trip ifAverage EPS surprise falls below 0% for 2 consecutive quarters.
- P2Attractive Valuation Quality FranchiseTripped
Trip ifForward price-to-earnings multiple expands above 15 times from the current 9.1 times.
- P3Exceptional Fcf Conversion
Trip ifFree cash flow falls below 100% of net income for 2 consecutive quarters.
- P4Momentum Just Below Threshold
Trip ifPrice closes above $74.99 and sustains for 4 consecutive weeks.