Critical Contrast: First American Financial (NYSE:FAF) and NI (NASDAQ:NODK)

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

Earnings & Valuation

This table compares First American Financial and NI”s 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	10.38
NI	$273.22 million	1.05	-$10.41 million	($0.20)	-70.20

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

Risk & Volatility

First American Financial has a beta of 1.28, indicating that its share price is 28% more volatile than the S&P 500. Comparatively, NI has a beta of 0.35, indicating that its share price is 65% less volatile than the S&P 500.

Profitability

This table compares First American Financial and NI’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%
NI	-1.60%	-1.79%	-0.81%

Institutional and Insider Ownership

89.1% of First American Financial shares are owned by institutional investors. Comparatively, 21.9% of NI shares are owned by institutional investors. 3.5% of First American Financial shares are owned by insiders. Comparatively, 1.0% of NI shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for First American Financial and NI, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First American Financial	0	0	6	1	3.14
NI	1	0	0	0	1.00

First American Financial currently has a consensus target price of $82.50, indicating a potential upside of 22.03%. Given First American Financial’s stronger consensus rating and higher probable upside, research analysts plainly believe First American Financial is more favorable than NI.

Summary

First American Financial beats NI on 14 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 NI

NI Holdings, Inc. underwrites property and casualty insurance products in the United States. Its products include private passenger auto, non-standard automobile, homeowners, farm owners, crop hail and multi-peril crop, and liability insurance policies. The company was founded in 1946 and is headquartered in Fargo, North Dakota. NI Holdings, Inc. operates as a subsidiary of Nodak Mutual Group, Inc.