Is First American Financial Corp. overvalued or undervalued?

As of 8 May 2025, the valuation grade for First American Financial Corp. has moved from expensive to very expensive. The company is currently overvalued, with a P/E ratio of 37, significantly higher than its peers such as Fidelity National Financial, Inc. at 14.79 and Old Republic International Corp. at 11.67. Additionally, the EV to EBITDA ratio stands at 24.78, which further emphasizes the premium at which the company is trading compared to its industry counterparts.
In terms of financial performance, First American Financial Corp. has a Price to Book Value of 1.16 and a Dividend Yield of 3.82%. The company's return on equity (ROE) is notably low at 3.16%, indicating potential concerns regarding profitability relative to shareholder equity. While the stock has outperformed the S&P 500 over the past year with a return of 11.98% compared to 10.26%, the overall valuation metrics suggest that the stock is not justified at its current price level.