Is First American Financial Corp. overvalued or undervalued?

As of 7 July 2025, the valuation grade for First American Financial Corp. has moved from expensive to very expensive. The company is overvalued based on its current metrics. The P/E ratio stands at 37, significantly higher than the peer average of approximately 11.21 for Old Republic International Corp., which is considered attractive. Additionally, the EV to EBITDA ratio is 24.78, while peers like Radian Group Inc. and Assured Guaranty Ltd. are much lower at around 8.98 and 7.78, respectively.
In terms of returns, First American Financial Corp. has underperformed compared to the S&P 500 over multiple periods, with a 1-year return of only 0.43% versus the S&P 500's 17.14%. This underperformance, combined with its high valuation ratios, reinforces the conclusion that the stock is overvalued in the current market.