Head-To-Head Contrast: First American Financial (NYSE:FAF) vs. Palomar (NASDAQ:PLMR)

First American Financial (NYSE:FAF) and Palomar (NASDAQ:PLMR) are both mid-cap finance companies, but which is the superior investment? We will compare the two companies based on the strength of their dividends, analyst recommendations, risk, earnings, profitability, institutional ownership and valuation.

Insider & Institutional Ownership

89.1% of First American Financial shares are held by institutional investors. Comparatively, 90.3% of Palomar shares are held by institutional investors. 3.5% of First American Financial shares are held by insiders. Comparatively, 3.7% of Palomar shares are held by 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

First American Financial has a beta of 1.24, suggesting that its share price is 24% more volatile than the S&P 500. Comparatively, Palomar has a beta of 0.44, suggesting that its share price is 56% less volatile than the S&P 500.

Earnings & Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First American Financial	$7.70 billion	0.89	$621.80 million	$6.51	10.29
Palomar	$875.97 million	3.60	$197.07 million	$7.18	16.57

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

Analyst Ratings

This is a summary of recent recommendations for First American Financial and Palomar, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First American Financial	0	0	6	1	3.14
Palomar	0	2	4	0	2.67

First American Financial currently has a consensus target price of $82.50, indicating a potential upside of 23.11%. Palomar has a consensus target price of $147.75, indicating a potential upside of 24.17%. Given Palomar’s higher possible upside, analysts clearly believe Palomar is more favorable than First American Financial.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
First American Financial	8.73%	12.58%	3.98%
Palomar	20.11%	22.62%	6.60%

Summary

Palomar beats First American Financial on 9 of the 15 factors compared between the two stocks.

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.

About Palomar

Palomar Holdings, Inc., a specialty insurance company, provides property and casualty insurance to residential and businesses in the United States. The company offers personal and commercial specialty property insurance products, including residential and commercial earthquake, fronting, commercial all risk, specialty homeowners, inland marine, Hawaii hurricane, and residential flood, as well as other products, such as assumed reinsurance. It markets and distributes its products through retail agents, wholesale brokers, program administrators, and carrier partnerships. The company was formerly known as GC Palomar Holdings and changed its name to Palomar Holdings, Inc. The company was incorporated in 2013 and is headquartered in La Jolla, California.