FAF
First American Financial Corporation
$74.50
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Mild
·
Conviction
Overvalued
Trading 8.4% above fair value
You pay
$74.50
Bear
$48.09
Fair
$68.70
Bull
$89.31
Bear
$48.09
-35.4%
ROTCE 13.0% → 1.27x TBV
Fair
$68.70
-7.8%
ROTCE 17.4% → 1.88x TBV
Bull
$89.31
+19.9%
ROTCE 20.0% → 2.25x TBV
Adjust Assumptions
17.4%
11.1%
Key Value Driver
ROTCE (17.4%) vs. cost of equity (11.1%)
Implied Market Multiple
2.12x
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. 11.1% cost of equity, fair P/TBV is 1.88x on $35.07 tangible book, implying $68.70 per share. DDM cross-check: $23.34.
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: $23.34 (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