Analyzing Palomar (NASDAQ:PLMR) & First American Financial (NYSE:FAF)

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

Institutional & Insider Ownership

90.3% of Palomar shares are held by institutional investors. Comparatively, 89.1% of First American Financial shares are held by institutional investors. 3.7% of Palomar shares are held by company insiders. Comparatively, 3.5% of First American Financial shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Valuation & Earnings

This table compares Palomar and First American Financial”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Palomar	$875.97 million	3.82	$197.07 million	$7.18	17.60
First American Financial	$7.45 billion	0.94	$621.80 million	$6.51	10.54

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 breakdown of current ratings and recommmendations for Palomar and First American Financial, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Palomar	0	2	4	0	2.67
First American Financial	0	1	6	0	2.86

Palomar currently has a consensus price target of $147.75, indicating a potential upside of 16.90%. First American Financial has a consensus price target of $83.25, indicating a potential upside of 21.38%. Given First American Financial’s stronger consensus rating and higher possible upside, analysts plainly believe First American Financial is more favorable than Palomar.

Volatility & Risk

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

Profitability

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

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

Summary

Palomar beats First American Financial on 8 of the 14 factors compared between the two stocks.

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.

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.