Head to Head Contrast: Allstate (NYSE:ALL) and First American Financial (NYSE:FAF)

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Allstate	8.79%	28.74%	5.05%
First American Financial	2.90%	10.41%	3.33%

Dividends

Allstate pays an annual dividend of $4.00 per share and has a dividend yield of 1.9%. First American Financial pays an annual dividend of $2.20 per share and has a dividend yield of 3.4%. Allstate pays out 18.8% of its earnings in the form of a dividend. First American Financial pays out 121.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Allstate has raised its dividend for 15 consecutive years and First American Financial has raised its dividend for 15 consecutive years.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Allstate and First American Financial, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Allstate	1	4	12	2	2.79
First American Financial	0	1	3	0	2.75

Allstate presently has a consensus price target of $231.56, suggesting a potential upside of 9.74%. First American Financial has a consensus price target of $75.00, suggesting a potential upside of 17.38%. Given First American Financial’s higher probable upside, analysts plainly believe First American Financial is more favorable than Allstate.

Earnings and Valuation

This table compares Allstate and First American Financial”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Allstate	$64.11 billion	0.87	$4.67 billion	$21.27	9.92
First American Financial	$6.13 billion	1.06	$131.10 million	$1.81	35.30

Allstate has higher revenue and earnings than First American Financial. Allstate 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.

Insider and Institutional Ownership

76.5% of Allstate shares are owned by institutional investors. Comparatively, 89.1% of First American Financial shares are owned by institutional investors. 1.7% of Allstate shares are owned by company insiders. Comparatively, 3.7% of First American Financial shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Risk & Volatility

Allstate has a beta of 0.38, meaning that its stock price is 62% less volatile than the S&P 500. Comparatively, First American Financial has a beta of 1.27, meaning that its stock price is 27% more volatile than the S&P 500.

Summary

Allstate beats First American Financial on 10 of the 17 factors compared between the two stocks.

About Allstate

The Allstate Corporation, together with its subsidiaries, provides property and casualty, and other insurance products in the United States and Canada. It operates in five segments: Allstate Protection; Protection Services; Allstate Health and Benefits; Run-off Property-Liability; and Corporate and Other segments. The Allstate Protection segment offers private passenger auto and homeowners insurance; other personal lines products; and commercial lines products through agents, contact centers, and online. The Protection Services segment provides consumer product protection; protection and insurance products, including vehicle service contracts, guaranteed asset protection, road hazard tire and wheel, and paintless dent repair protection; and roadside assistance, device and mobile data collection services, and analytic solutions using automotive telematics information, as well as identity theft protection and remediation services. This segment also offers its products under various brands, including Allstate Protection Plans, Allstate Dealer Services, Allstate Roadside, Arity, Avail, and Allstate Identity Protection. The Allstate Health and Benefits segment provides life, accident, critical illness, short-term disability, and other health insurance products; stop-loss and fully insured group health products to employers; and short-term medical and medicare supplement insurance to individuals. The Run-off Property-Liability segment offers property and casualty insurance coverage that primarily relates to policies written during the 1960s through the mid-1980s. The Corporate and Other segment provides debt services, as well as non-insurance operations. It sells its products through agents, independent agents, call and contact centers, retailers, direct to consumer, wholesale partners, and affinity groups, as well as through online and mobile applications. The Allstate Corporation was founded in 1931 and is headquartered in Northbrook, Illinois.

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.