First American Corporation (The) (NYSE: FAF) and Assured Guaranty (NYSE:AGO) are both mid-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, analyst recommendations, institutional ownership, risk, profitability, earnings and valuation.

Dividends

First American Corporation (The) pays an annual dividend of $1.52 per share and has a dividend yield of 3.1%. Assured Guaranty pays an annual dividend of $0.57 per share and has a dividend yield of 1.3%. First American Corporation (The) pays out 46.1% of its earnings in the form of a dividend. Assured Guaranty pays out 6.5% 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 and Assured Guaranty has raised its dividend for 5 consecutive years.

Volatility and Risk

First American Corporation (The) has a beta of 0.72, suggesting that its share price is 28% less volatile than the S&P 500. Comparatively, Assured Guaranty has a beta of 1.67, suggesting that its share price is 67% more volatile than the S&P 500.

Insider and Institutional Ownership

83.2% of First American Corporation (The) shares are held by institutional investors. Comparatively, 96.8% of Assured Guaranty shares are held by institutional investors. 3.1% of First American Corporation (The) shares are held by company insiders. Comparatively, 2.6% of Assured Guaranty shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for First American Corporation (The) and Assured Guaranty, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
First American Corporation (The) 0 1 0 0 2.00
Assured Guaranty 0 1 2 0 2.67

First American Corporation (The) currently has a consensus price target of $39.00, indicating a potential downside of 20.52%. Assured Guaranty has a consensus price target of $47.00, indicating a potential upside of 9.99%. Given Assured Guaranty’s stronger consensus rating and higher possible upside, analysts clearly believe Assured Guaranty is more favorable than First American Corporation (The).

Valuation and Earnings

This table compares First American Corporation (The) and Assured Guaranty’s gross 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 0.94 $671.97 million $3.30 14.87
Assured Guaranty $1.54 billion 3.30 $1.05 billion $8.82 4.84

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

Profitability

This table compares First American Corporation (The) and Assured Guaranty’s 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%
Assured Guaranty 61.25% 16.00% 7.30%

Summary

Assured Guaranty beats First American Corporation (The) on 12 of the 16 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.

Assured Guaranty Company Profile

Assured Guaranty Ltd. is a holding company. The Company, through its subsidiaries, provides credit protection products to the United States and international public finance, including infrastructure, and structured finance markets. It applies its credit underwriting judgment, risk management skills and capital markets experience primarily to offer financial guaranty insurance that protects holders of debt instruments and other monetary obligations from defaults in scheduled payments. It markets its financial guaranty insurance directly to issuers and underwriters of public finance and structured finance securities, as well as to investors in such obligations. It guarantees obligations issued principally in the United States and the United Kingdom and also guarantees obligations issued in other countries and regions, including Australia and Western Europe. It also provides other forms of insurance that are in line with its risk profile and benefit from its underwriting experience.

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