FAF
First American Financial Corporation
$61.90
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Mild
·
Conviction
Fair Value
Trading 9.9% below fair value
You pay
$61.90
Bear
$48.09
Fair
$68.70
Bull
$89.31
Bear
$48.09
-22.3%
ROTCE 13.0% → 1.25x TBV
Fair
$68.70
+11.0%
ROTCE 17.4% → 1.85x TBV
Bull
$89.31
+44.3%
ROTCE 20.0% → 2.21x TBV
Adjust Assumptions
17.4%
11.2%
Key Value Driver
ROTCE (17.4%) vs. cost of equity (11.2%)
Implied Market Multiple
1.77x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (15 analysts)
$83.00
Divergence from AlphaVal
17%
Summary
With ROTCE of 17.4% vs. 11.2% cost of equity, fair P/TBV is 1.85x on $35.07 tangible book, implying $68.70 per share. DDM cross-check: $24.90.
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: $24.90 (64% 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