Financial Review: Berkshire Hathaway (BRK.B) vs. First American Corporation (The) (FAF)

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

Earnings & Valuation

This table compares Berkshire Hathaway and First American Corporation (The)’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Berkshire Hathaway N/A N/A N/A $8.85 N/A
First American Corporation (The) $5.78 billion 0.95 $671.97 million $3.30 15.04

First American Corporation (The) has higher revenue and earnings than Berkshire Hathaway. Berkshire Hathaway 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.

Analyst Recommendations

This is a summary of current ratings and price targets for Berkshire Hathaway and First American Corporation (The), as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Berkshire Hathaway 1 1 2 0 2.25
First American Corporation (The) 0 1 0 0 2.00

Berkshire Hathaway currently has a consensus price target of $207.50, suggesting a potential upside of Infinity. First American Corporation (The) has a consensus price target of $39.00, suggesting a potential downside of 21.43%. Given Berkshire Hathaway’s stronger consensus rating and higher probable upside, equities analysts clearly believe Berkshire Hathaway is more favorable than First American Corporation (The).

Profitability

This table compares Berkshire Hathaway and First American Corporation (The)’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Berkshire Hathaway 9.08% 5.83% 2.66%
First American Corporation (The) 6.38% 12.22% 4.15%

Institutional and Insider Ownership

35.3% of Berkshire Hathaway shares are owned by institutional investors. Comparatively, 83.2% of First American Corporation (The) shares are owned by institutional investors. 6.1% of Berkshire Hathaway shares are owned by company insiders. Comparatively, 3.1% of First American Corporation (The) shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Volatility & Risk

Berkshire Hathaway has a beta of 0.88, meaning that its share price is 12% less volatile than the S&P 500. Comparatively, First American Corporation (The) has a beta of 0.69, meaning that its share price is 31% less volatile than the S&P 500.

Dividends

First American Corporation (The) pays an annual dividend of $1.52 per share and has a dividend yield of 3.1%. Berkshire Hathaway does not pay a dividend. First American Corporation (The) pays out 46.1% of its earnings in the form of a dividend. Berkshire Hathaway has increased its dividend for 5 consecutive years.

Summary

Berkshire Hathaway beats First American Corporation (The) on 10 of the 15 factors compared between the two stocks.

About Berkshire Hathaway

Berkshire Hathaway Inc. is a holding company owning subsidiaries engaged in various business activities. Its segments include Insurance, such as GEICO, Berkshire Hathaway Primary Group, General Re Corporation and Berkshire Hathaway Reinsurance Group; Burlington Northern Santa Fe, LLC, which is engaged in the operation of the railroad system; Berkshire Hathaway Energy, which includes regulated electric and gas utility; Manufacturing, which includes manufacturers of various products, including industrial, consumer and building products; McLane Company, which is engaged in the wholesale distribution of groceries and non-food items; Service and retailing, which includes providers of various services, including fractional aircraft ownership programs, aviation pilot training and various retailing businesses, and Finance and financial products, which includes manufactured housing and related consumer financing, transportation equipment, manufacturing and leasing, and furniture leasing.

About First American Corporation (The)

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.

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