Highlights

  • First American Financial shows 52.60% basic EPS growth, P/E of 9.12, PEG of -2.00.
  • Third quarter revenues were $2,084.6 million, up 5.3%; net income attributable was $177.0 million.
  • The board declared a quarterly dividend of 61 cents per share, an 11 percent increase.
  • Company repurchased 0.9 million shares for $55.5 million in nine months; $244.5 million remains authorized.

An undervalued growth stock pairs earnings growth with its P/E and PEG ratios, and First American Financial (NYSE:FAF) shows all three: basic earnings per share grew 52.60% over one year, the trailing twelve-month P/E ratio is 9.12 and the PEG ratio, on an expected basis, is -2.00, with shares trading at USD 63.51 on October 28, 2026, down 1.37%. Alongside those figures, the title insurance and home warranty group declared a quarterly cash dividend of 61 cents per common share in September, paid it in October, and reported third quarter 2026 net income attributable to the Company of $177.0 million, or $1.72 per diluted share.

First American Financial is based in Santa Ana, California, and incorporated in Delaware. Its title insurance and services segment issues title insurance policies on residential and commercial property and provides closing, escrow, warehouse lending, subservicing and banking services. The home warranty segment sells residential service contracts in 36 states and the District of Columbia. A corporate segment holds venture-stage investments and financing facilities.

Growth: Third Quarter Earnings, Revenues and Title Orders

Net income attributable to the Company was $177.0 million in the third quarter of 2026 against $189.6 million a year earlier, and $520.6 million for the nine months against $409.9 million. Basic earnings per share were $1.72 against $1.84 for the quarter and $5.06 against $3.96 for the nine months. Diluted earnings per share were $5.04 against $3.95 for the nine months.

Total revenues were $2,084.6 million, up 5.3%, and $6,039.9 million for the nine months, up 11.8%. The company said the quarterly increase was primarily attributable to agent premiums, up 8.7% to $868.4 million, and direct premiums and escrow fees, up 6.9% to $642.8 million. Direct premiums and escrow fees from domestic commercial transactions increased 20.9%, while residential refinance and purchase transactions decreased 1.2% and 2.6%.

Valuation: P/E of 9.12, PEG of -2.00 and Dividend Commentary

The P/E ratio of 9.12 is measured on trailing twelve-month earnings, and the PEG ratio of -2.00 on an expected basis. Cash provided by operating activities was $600.2 million for the nine months against $581.5 million a year earlier.

On the third quarter call, management stated that the company targets a dividend payout ratio of 40% over the cycle, and that the dividend increase brings the payout in line with that target.

Capital Returns, Debt and Liquidity

The repurchase plan authorizes up to $300 million of common stock, and $244.5 million remained at September 30, 2026. The company repurchased and retired 0.9 million shares for $55.5 million in the nine months.

The debt to capitalization ratio was 30.3% against 30.7% at December 31, 2025, and the adjusted ratio, a non-GAAP measure that excludes secured financings payable of $807.5 million, was 22.2% against 21.9%. At the holding company, liquidity included $355.4 million of cash and cash equivalents and $900.0 million available on the revolving credit facility, which terminates on May 17, 2028 and had no outstanding borrowings.

Disclosed Risks and Outlook for 2027

The company disclosed that its business depends on cyclical real estate and mortgage activity, and that higher interest rates typically decrease revenues. Domestic title orders opened per day decreased 8.2%. The title segment pretax margin was 12.4% against 12.9%, and home warranty income before income taxes was $11.3 million against $16.2 million, a decrease of 30.2%. Title segment interest expense rose 26.7%, and the corporate segment reported a loss before income taxes of $27.9 million against $5.4 million.

The company is party to lawsuits, including class actions, and governmental agencies are examining certain operations; it does not believe these will have a material adverse effect, though some could change business practices.

On the call, Chief Executive Officer Mark Seaton said open purchase orders were down 8%, refinance down 35% and commercial down 7% in the first three weeks of October, and that management expects a lower-for-longer residential origination environment into 2027. Chief Financial Officer Matt Wajner said 2027 revenue is expected to be essentially flat against 2026 and that he does not see margin expansion next year. Management also said the release of prior year loss reserves could slow or cease. The company plans to launch its Sequoia platform for purchase transactions throughout Northern California and expand into Florida in the fourth quarter.