First American Corporation (The) (NYSE: FAF) and Heritage Insurance Holdings (NYSE:HRTG) are both finance companies, but which is the better stock? We will contrast the two companies based on the strength of their earnings, institutional ownership, profitability, analyst recommendations, risk, valuation and dividends.

Profitability

This table compares First American Corporation (The) and Heritage Insurance Holdings’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
First American Corporation (The) 6.38% 12.22% 4.15%
Heritage Insurance Holdings 5.07% 5.67% 1.98%

Analyst Ratings

This is a summary of current recommendations for First American Corporation (The) and Heritage Insurance Holdings, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
First American Corporation (The) 0 1 0 0 2.00
Heritage Insurance Holdings 0 0 3 0 3.00

First American Corporation (The) currently has a consensus target price of $39.00, indicating a potential downside of 22.37%. Heritage Insurance Holdings has a consensus target price of $17.00, indicating a potential upside of 21.00%. Given Heritage Insurance Holdings’ stronger consensus rating and higher possible upside, analysts clearly believe Heritage Insurance Holdings is more favorable than First American Corporation (The).

Institutional & Insider Ownership

83.2% of First American Corporation (The) shares are owned by institutional investors. Comparatively, 61.3% of Heritage Insurance Holdings shares are owned by institutional investors. 3.1% of First American Corporation (The) shares are owned by company insiders. Comparatively, 16.1% of Heritage Insurance Holdings shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Risk and Volatility

First American Corporation (The) has a beta of 0.69, suggesting that its stock price is 31% less volatile than the S&P 500. Comparatively, Heritage Insurance Holdings has a beta of 1.36, suggesting that its stock price is 36% more volatile than the S&P 500.

Valuation and Earnings

This table compares First American Corporation (The) and Heritage Insurance Holdings’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
First American Corporation (The) $5.78 billion 0.96 $671.97 million $3.30 15.22
Heritage Insurance Holdings $408.34 million 1.00 $43.38 million $0.72 19.51

First American Corporation (The) has higher revenue and earnings than Heritage Insurance Holdings. First American Corporation (The) is trading at a lower price-to-earnings ratio than Heritage Insurance Holdings, indicating that it is currently the more affordable of the two stocks.

Dividends

First American Corporation (The) pays an annual dividend of $1.52 per share and has a dividend yield of 3.0%. Heritage Insurance Holdings pays an annual dividend of $0.24 per share and has a dividend yield of 1.7%. First American Corporation (The) pays out 46.1% of its earnings in the form of a dividend. Heritage Insurance Holdings pays out 33.3% 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 Corporation (The) has raised its dividend for 5 consecutive years. First American Corporation (The) is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

First American Corporation (The) beats Heritage Insurance Holdings on 9 of the 17 factors compared between the two stocks.

First American Corporation (The) Company Profile

First American Financial Corporation, through its subsidiaries, is engaged in the business of providing financial services. The Company operates through the title insurance and services segment, and specialty insurance segment. The title insurance and services segment provides title insurance, closing and/or escrow services and similar or related services domestically and internationally in connection with residential and commercial real estate transactions. The title insurance and services segment also provides products, services and solutions involving the use of property related data, including data derived from its database, which are designed to manage risk or otherwise facilitate real estate transactions. The specialty insurance segment issues property and casualty insurance policies and sells home warranty products to residential homeowners and renters for liability losses and typical hazards, such as fire, theft, vandalism and other types of property damage.

Heritage Insurance Holdings Company Profile

Heritage Insurance Holdings, Inc. (Heritage Insurance) is a property and casualty insurance holding company. The Company provides personal and commercial residential insurance. Through its subsidiary, Heritage Property & Casualty Insurance Company (Heritage P&C), it provides personal residential insurance for single-family homeowners and condominium owners, rental property insurance and commercial residential insurance in the state of Florida and North Carolina. The Company is vertically integrated and controls or manages all aspects of insurance underwriting, customer service, actuarial analysis, distribution and claims processing and adjusting. The Company’s primary products are personal and commercial residential insurance, which it offers only in Florida. As of December 31, 2016, it marketed and wrote personal lines voluntary policies through a network of approximately 1,900 independent agents. It had 150,998 voluntary personal residential policies as of December 31, 2016.

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