Over the last six months, Fidelity National Financial’s shares have sunk to $48.83, producing a disappointing 13.7% loss - a stark contrast to the S&P 500’s 7.7% gain. This was partly due to its softer quarterly results and might have investors contemplating their next move.

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 don’t have much confidence in Fidelity National Financial. Here are three reasons you should be careful with FNF, plus one stock we’d rather own.

1. Declining Net Premiums Earned Reflect Weakness

Net premiums earned are net of what’s paid to reinsurers (insurance for insurance companies), which are used by insurers to protect themselves from large losses.

Fidelity National Financial’s net premiums earned has declined by 2.5% 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

Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.

Sadly for Fidelity National Financial, its EPS declined by 3.5% annually over the last five years while its revenue grew by 4%. This tells us the company became less profitable on a per-share basis as it expanded.

3. Substandard BVPS Growth Indicates Limited Asset Expansion

We consider book value per share (BVPS) a critical metric for insurance companies. BVPS represents the total net worth per share, providing insight into a company’s financial strength and ability to meet policyholder obligations.

To the detriment of investors, Fidelity National Financial’s BVPS grew at a weak 1.7% annual clip over the last two years.

Final Judgment

Fidelity National Financial falls short of our quality standards. Following the recent decline, the stock trades at 1.4× forward P/B (or $48.83 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 a top digital advertising platform riding the creator economy.

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