First American Financial (NYSE:FAF) & Root (NASDAQ:ROOT) Financial Analysis

First American Financial (NYSE:FAF) and Root (NASDAQ:ROOT) 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 & Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First American Financial	$6.13 billion	1.10	$131.10 million	$1.81	36.49
Root	$1.18 billion	1.21	$30.90 million	$5.01	18.41

First American Financial has higher revenue and earnings than Root. Root 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.

Analyst Ratings

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

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First American Financial	0	1	3	0	2.75
Root	0	6	2	1	2.44

First American Financial currently has a consensus price target of $75.00, indicating a potential upside of 13.57%. Root has a consensus price target of $123.83, indicating a potential upside of 34.28%. Given Root’s higher probable upside, analysts plainly believe Root is more favorable than First American Financial.

Institutional & Insider Ownership

89.1% of First American Financial shares are owned by institutional investors. Comparatively, 59.8% of Root shares are owned by institutional investors. 3.7% of First American Financial shares are owned by insiders. Comparatively, 11.7% of Root 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 1.26, meaning that its stock price is 26% more volatile than the S&P 500. Comparatively, Root has a beta of 2.24, meaning that its stock price is 124% more volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
First American Financial	2.90%	10.41%	3.33%
Root	6.02%	38.24%	5.27%

Summary

Root beats First American Financial on 9 of the 15 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 Root

Root, Inc. provides insurance products and services in the United States. The company offers automobile, homeowners, and renters insurance products. It operates a direct-to-consumer model; and serves customers primarily through mobile applications, as well as through its website. The company's direct distribution channels also cover digital, media, and referral channels, as well as distribution partners and agencies. Root, Inc. was incorporated in 2015 and is headquartered in Columbus, Ohio.