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Should Value Investors Buy These Finance Stocks?

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

First American Financial (FAF) is a stock many investors are watching right now. FAF is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock holds a P/E ratio of 11.34, while its industry has an average P/E of 27.88. Over the last 12 months, FAF's Forward P/E has been as high as 11.96 and as low as 8.57, with a median of 10.57.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. FAF has a P/S ratio of 0.91. This compares to its industry's average P/S of 0.98.

Investors could also keep in mind Fidelity National Financial (FNF), an Insurance - Property and Casualty stock with a Zacks Rank of # 2 (Buy) and Value grade of A.

Additionally, Fidelity National Financial has a P/B ratio of 1.50 while its industry's price-to-book ratio sits at 1.23. For FNF, this valuation metric has been as high as 1.68, as low as 1.27, with a median of 1.50 over the past year.

These figures are just a handful of the metrics value investors tend to look at, but they help show that First American Financial and Fidelity National Financial are likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, FAF and FNF feels like a great value stock at the moment.


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First American Financial Corporation (FAF): Free Stock Analysis Report
 
Fidelity National Financial, Inc. (FNF): Free Stock Analysis Report
 
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