Over the last six months, Fidelity National Financial’s shares have sunk to $46.22, producing a disappointing 10.5% loss - a stark contrast to the S&P 500’s 11.8% gain. This may have investors wondering how to approach the situation.

Is now the time to buy Fidelity National Financial, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.

Why Do We Think Fidelity National Financial Will Underperform?

Even though the stock has become cheaper, we’re sitting this one out for now. Here are three reasons why there are better opportunities than FNF, plus one stock we’d rather own.

1. Declining Net Premiums Earned Reflect Weakness

When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are therefore net of what’s ceded to reinsurers as a risk mitigation and transfer strategy.

Fidelity National Financial’s net premiums earned has declined by 3.8% annually over the last five years, much worse than the broader insurance industry. This shows that policy underwriting underperformed its other business lines.

2. EPS Trending Down

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Sadly for Fidelity National Financial, its EPS declined by 5.5% annually over the last five years while its revenue grew by 2.3%. This tells us the company became less profitable on a per-share basis as it expanded.

3. Substandard BVPS Growth Indicates Limited Asset Expansion

For insurers, book value per share (BVPS) is a vital measure of financial health, representing the total assets available to shareholders after accounting for all liabilities, including policyholder reserves and claims obligations.

Disappointingly for investors, Fidelity National Financial’s BVPS grew at a weak 2.3% annual clip over the last two years.

Final Judgment

Fidelity National Financial doesn’t pass our quality test. After the recent drawdown, the stock trades at 1.3× forward P/B (or $46.22 per share). While this valuation is reasonable, we don’t see a big opportunity at the moment. There are more exciting stocks to buy at the moment. We’d suggest looking at the most dominant software business in the world.

Stocks We Like More Than Fidelity National Financial

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