First American Financial (NYSE:FAF) versus First Acceptance (OTCMKTS:FACO) Critical Analysis

First American Financial (NYSE:FAF) and First Acceptance (OTCMKTS:FACO) are both finance companies, but which is the better stock? We will compare the two companies based on the strength of their risk, dividends, institutional ownership, earnings, analyst recommendations, profitability and valuation.

Earnings and Valuation

This table compares First American Financial and First Acceptance”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First American Financial	$7.08 billion	0.90	$131.10 million	$4.65	13.52
First Acceptance	$559.43 million	0.26	$26.29 million	$0.77	5.10

First American Financial has higher revenue and earnings than First Acceptance. First Acceptance is trading at a lower price-to-earnings ratio than First American Financial, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares First American Financial and First Acceptance’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
First American Financial	6.80%	11.01%	3.50%
First Acceptance	4.66%	14.50%	3.51%

Analyst Ratings

This is a summary of current ratings for First American Financial and First Acceptance, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First American Financial	1	1	3	0	2.40
First Acceptance	0	0	0	0	0.00

First American Financial currently has a consensus price target of $76.00, indicating a potential upside of 20.87%. Given First American Financial’s stronger consensus rating and higher probable upside, research analysts plainly believe First American Financial is more favorable than First Acceptance.

Institutional & Insider Ownership

89.1% of First American Financial shares are owned by institutional investors. Comparatively, 0.1% of First Acceptance shares are owned by institutional investors. 3.7% of First American Financial shares are owned by insiders. Comparatively, 9.5% of First Acceptance shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Risk and Volatility

First American Financial has a beta of 1.24, meaning that its stock price is 24% more volatile than the S&P 500. Comparatively, First Acceptance has a beta of 0.08, meaning that its stock price is 92% less volatile than the S&P 500.

Summary

First American Financial beats First Acceptance on 11 of the 14 factors compared between the two stocks.

About First American Financial

First American Financial Corporation, through its subsidiaries, provides financial services. It operates through Title Insurance and Services, and Home Warranty segments. The Title Insurance and Services segment issues title insurance policies on residential and commercial property, as well as offers related products and services internationally. This segment also provides closing and/or escrow services; products, services, and solutions to mitigate risk or otherwise facilitate real estate transactions; and appraisals and other valuation-related products and services, lien release and document custodial services, warehouse lending services, default-related products and services, document generation services, mortgage loans subservicing, and related products and services, as well as banking, trust, and wealth management services. In addition, it accommodates tax-deferred exchanges of real estate; and maintains, manages, and provides access to title plant data and records. This segment offers its products through a network of direct operations and agents in various states and in the District of Columbia, as well as in Canada, the United Kingdom, Australia, New Zealand, South Korea, and internationally. The Home Warranty segment provides home warranty products, including residential service contracts that cover residential systems, such as heating and air conditioning systems, and various appliances against failures that occur as the result of normal usage during the coverage period. This segment operates in various states and the District of Columbia. The company was founded in 1889 and is headquartered in Santa Ana, California.

About First Acceptance

First Acceptance Corporation, together with its subsidiaries, operates as a retailer, servicer, and underwriter of non-standard personal automobile insurance and related products in the United States. It issues non-standard automobile insurance policies to individuals based on their inability or unwillingness to obtain insurance coverage from standard carriers due to various factors, including their payment preference, failure to maintain continuous insurance coverage, or driving record. The company also underwrites auto and motorcycle insurance products; and renters, homeowners, commercial, pet, life, travel, outdoor vehicle, and hospital indemnity insurance products. In addition, it provides TeleMed, a subscription service that offers access to doctor for consulting, diagnosing, and prescribing medication for non-emergency illness. The company primarily distributes its products through its retail locations, as well as through call center and internet. As of December 31, 2021, it leased and operated 338 retail locations, and a call center. First Acceptance Corporation was founded in 1969 and is headquartered in Nashville, Tennessee.