First American Financial (NYSE:FAF) and White Mountains Insurance Group (NYSE:WTM) Head to Head Review

First American Financial (NYSE:FAF) and White Mountains Insurance Group (NYSE:WTM) are both mid-cap finance companies, but which is the better business? We will contrast the two companies based on the strength of their profitability, dividends, analyst recommendations, institutional ownership, valuation, risk and earnings.

Profitability

This table compares First American Financial and White Mountains Insurance Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
First American Financial	8.34%	11.92%	3.82%
White Mountains Insurance Group	29.62%	8.41%	3.84%

Valuation and Earnings

This table compares First American Financial and White Mountains Insurance Group”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First American Financial	$7.45 billion	0.96	$621.80 million	$6.01	11.67
White Mountains Insurance Group	$3.74 billion	1.51	$1.11 billion	$432.35	5.14

White Mountains Insurance Group has lower revenue, but higher earnings than First American Financial. White Mountains Insurance Group 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.

Institutional and Insider Ownership

89.1% of First American Financial shares are owned by institutional investors. Comparatively, 88.7% of White Mountains Insurance Group shares are owned by institutional investors. 3.7% of First American Financial shares are owned by insiders. Comparatively, 3.2% of White Mountains Insurance Group shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Risk & Volatility

First American Financial has a beta of 1.27, indicating that its share price is 27% more volatile than the S&P 500. Comparatively, White Mountains Insurance Group has a beta of 0.36, indicating that its share price is 64% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent recommendations for First American Financial and White Mountains Insurance Group, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First American Financial	0	2	4	0	2.67
White Mountains Insurance Group	0	1	0	0	2.00

First American Financial currently has a consensus target price of $77.67, suggesting a potential upside of 10.71%. Given First American Financial’s stronger consensus rating and higher possible upside, equities research analysts plainly believe First American Financial is more favorable than White Mountains Insurance Group.

Dividends

First American Financial pays an annual dividend of $2.20 per share and has a dividend yield of 3.1%. White Mountains Insurance Group pays an annual dividend of $1.00 per share and has a dividend yield of 0.0%. First American Financial pays out 36.6% of its earnings in the form of a dividend. White Mountains Insurance Group pays out 0.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. First American Financial has increased its dividend for 15 consecutive years. First American Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

First American Financial beats White Mountains Insurance Group on 11 of the 17 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 White Mountains Insurance Group

White Mountains Insurance Group, Ltd., through its subsidiaries, provides insurance and other financial services in the United States. The company operates through HG Global/BAM, Ark/WM Outrigger, Kudu, and Other Operations segments. The HG Global/BAM segment provides insurance on municipal bonds issued to finance public purposes, such as schools, utilities, and transportation facilities, as well as reinsurance protection services. The Ark/WM Outrigger segment offers reinsurance and insurance, including property, marine and energy, accident and health, casualty, and specialty products. The Kudu segment provides capital solutions to boutique asset and wealth managers for generational ownership transfers, management buyouts, acquisitions and growth finances, and legacy partner liquidity, as well as strategic assistance to investees. The Other Operations segment offers insurance solutions to travel industry through broker channel and on a direct-to-consumer basis; and manages separate accounts and pooled investment vehicles for insurance-linked securities sectors, including catastrophe bonds, collateralized reinsurance investments, and industry loss warranties of third-party clients. White Mountains Insurance Group, Ltd. was incorporated in 1980 and is headquartered in Hamilton, Bermuda.