FAF
First American Financial Corporation
$70.09
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Mild
·
Conviction
Fair Value
Trading 3.0% below fair value
You pay
$70.09
Bear
$50.59
Fair
$72.28
Bull
$93.96
Bear
$50.59
-27.8%
ROTCE 13.0% → 1.25x TBV
Fair
$72.28
+3.1%
ROTCE 17.4% → 1.86x TBV
Bull
$93.96
+34.1%
ROTCE 20.0% → 2.22x TBV
Key Value Driver
ROTCE (17.4%) vs. cost of equity (11.2%)
Implied Market Multiple
1.99x
Summary
Our base-case estimate uses P/Tangible Book × ROE Quality. We then blend that result with the average analyst price target of $83.00 from 15 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $72.28 per share.
Warnings
Traditional cash flow models don't work well for banks — lending activity distorts how much cash the business actually generates.
Common valuation shortcuts don't apply here — for banks, interest payments are a core business cost, not overhead.
Dividend-based valuation: $23.08 (66% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Key Risks
- Book value quality matters as much as level — check loan loss reserves
- Interest rate sensitivity creates non-linear earnings surprises
- Insurance reserving is actuarial, not financial — errors emerge slowly