Comparing First American Financial (NYSE:FAF) & ProAssurance (NYSE:PRA)

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

Volatility & Risk

ProAssurance has a beta of 0.02, meaning that its stock price is 98% less volatile than the S&P 500. Comparatively, First American Financial has a beta of 1.24, meaning that its stock price is 24% more volatile than the S&P 500.

Earnings & Valuation

This table compares ProAssurance and First American Financial”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
ProAssurance	$1.10 billion	1.13	$50.92 million	$1.25	19.20
First American Financial	$7.45 billion	0.89	$621.80 million	$6.51	10.04

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
ProAssurance	5.99%	6.82%	1.64%
First American Financial	8.73%	12.58%	3.98%

Institutional & Insider Ownership

85.6% of ProAssurance shares are held by institutional investors. Comparatively, 89.1% of First American Financial shares are held by institutional investors. 1.2% of ProAssurance shares are held by company insiders. Comparatively, 3.5% of First American Financial shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for ProAssurance and First American Financial, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
ProAssurance	0	1	0	1	3.00
First American Financial	0	0	6	1	3.14

First American Financial has a consensus target price of $82.50, indicating a potential upside of 26.25%. Given First American Financial’s stronger consensus rating and higher possible upside, analysts clearly believe First American Financial is more favorable than ProAssurance.

Summary

First American Financial beats ProAssurance on 12 of the 14 factors compared between the two stocks.

About ProAssurance

ProAssurance Corporation, through its subsidiaries, provides property and casualty insurance, and reinsurance products in the United States. The company operates through Specialty Property and Casualty, Workers’ Compensation Insurance, and Segregated Portfolio Cell Reinsurance segments. It offers professional liability insurance to healthcare providers and institutions, and attorneys and their firms; medical technology liability insurance to medical technology and life sciences companies; and custom alternative risk solutions, including assumed reinsurance, loss portfolio transfers, and captive cell programs for healthcare professional liability insureds. The company also provides workers’ compensation insurance products, such as guaranteed cost policies, policyholder dividend policies, retrospectively rated policies, and deductible policies, as well as alternative market solutions that include program design, fronting, claims administration, risk management, SPC rental, asset management, and SPC management services for individual companies, agencies, groups, and associations. The company also participates in Syndicate 1729 at Lloyd’s of London for underwriting. It markets its products through independent agencies and brokers, as well as an internal business development team. The company was founded in 1976 and is headquartered in Birmingham, Alabama.

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.