FAF vs. WRB: Which Stock Is the Better Value Option?
Investors looking for stocks in the Insurance - Property and Casualty sector might want to consider either First American Financial (FAF) or 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.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, First American Financial is sporting a Zacks Rank of #2 (Buy), while W.R. Berkley has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that FAF has an improving earnings outlook. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
FAF currently has a forward P/E ratio of 11.81, while WRB has a forward P/E of 22.68. We also note that FAF has a PEG ratio of 1.07. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. WRB currently has a PEG ratio of 2.52.
Another notable valuation metric for FAF is its P/B ratio of 1.63. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, WRB has a P/B of 1.93.
These metrics, and several others, help FAF earn a Value grade of A, while WRB has been given a Value grade of C.
FAF has seen stronger estimate revision activity and sports more attractive valuation metrics than WRB, so it seems like value investors will conclude that FAF is the superior option right now.
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First American Financial Corporation (FAF): Free Stock Analysis Report
W.R. Berkley Corporation (WRB): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.