Contrasting Axis Capital (NYSE:AXS) & First American Financial (NYSE:FAF)

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

Valuation and Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Axis Capital	$6.56 billion	1.13	$1.01 billion	$13.42	7.49
First American Financial	$7.70 billion	0.90	$621.80 million	$6.51	10.43

Axis Capital has higher earnings, but lower revenue than First American Financial. Axis Capital 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 & Institutional Ownership

93.4% of Axis Capital shares are owned by institutional investors. Comparatively, 89.1% of First American Financial shares are owned by institutional investors. 0.6% of Axis Capital shares are owned by company insiders. Comparatively, 3.5% 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 will outperform the market over the long term.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Axis Capital	16.00%	18.12%	3.02%
First American Financial	8.73%	12.58%	3.98%

Analyst Ratings

This is a summary of current ratings and price targets for Axis Capital and First American Financial, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Axis Capital	0	2	8	0	2.80
First American Financial	0	0	6	1	3.14

Axis Capital presently has a consensus price target of $122.10, indicating a potential upside of 21.48%. First American Financial has a consensus price target of $82.50, indicating a potential upside of 21.52%. Given First American Financial’s stronger consensus rating and higher probable upside, analysts plainly believe First American Financial is more favorable than Axis Capital.

Dividends

Axis Capital pays an annual dividend of $1.76 per share and has a dividend yield of 1.8%. First American Financial pays an annual dividend of $2.20 per share and has a dividend yield of 3.2%. Axis Capital pays out 13.1% of its earnings in the form of a dividend. First American Financial pays out 33.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. First American Financial has raised its dividend for 15 consecutive years. First American Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk & Volatility

Axis Capital has a beta of 0.54, suggesting that its stock price is 46% less volatile than the S&P 500. Comparatively, First American Financial has a beta of 1.28, suggesting that its stock price is 28% more volatile than the S&P 500.

Summary

First American Financial beats Axis Capital on 10 of the 18 factors compared between the two stocks.

About Axis Capital

AXIS Capital Holdings Limited, through its subsidiaries, provides various specialty insurance and reinsurance products in Bermuda, the United States, and internationally. It operates through two segments, Insurance and Reinsurance. The Insurance segment offers professional insurance products that cover directors' and officers' liability, errors and omissions, employment practices, fiduciary, crime, professional indemnity, medical malpractice, and other financial insurance related coverages for commercial enterprises, financial institutions, not-for-profit organizations, and other professional service providers; and property insurance products for commercial buildings, residential premises, construction projects, property in transit, onshore renewable energy installations, and physical damage and business interruption following an act of terrorism. This segment also provides marine and aviation insurance services for offshore energy, renewable offshore energy, cargo, liability, including kidnap and ransom, fine art, specie, and hull war, hull and liability, and specific war coverage for passenger airlines, cargo operations, general aviation operations, airports, aviation authorities, security firms, and product manufacturers; personal accident, travel insurance, specialty health products for employer and affinity groups, and pet insurance products; and liability, cyber, and credit and political risk insurance services. The Reinsurance segment offers agriculture, marine and aviation, catastrophe, accidental and health, credit and surety, motor, professional, travel, life, engineering, property, and liability reinsurance products. AXIS Capital Holdings Limited was founded in 2001 and is headquartered in Pembroke, Bermuda.

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.