3 Compelling Reasons to Let Go of FNF and One Alternative Stock Worth Buying

Fidelity National Financial’s Recent Performance: A Closer Look

In the last half-year, Fidelity National Financial’s share price dropped to $49.21, resulting in a 17.9% loss for investors. This decline stands in stark contrast to the S&P 500, which rose by 4.8% during the same period. The weaker quarterly results contributed to this underperformance, leaving shareholders to reconsider their investment strategy.

Should you consider adding Fidelity National Financial to your portfolio now, or is caution warranted?

Reasons for Our Lack of Enthusiasm

Even though the stock is more affordable, we remain hesitant about Fidelity National Financial. Below are three key factors that dampen our outlook, along with an alternative stock we prefer.

1. Net Premiums Earned Are Falling

Insurance companies often use reinsurance to shield themselves from significant losses, meaning net premiums earned represent the total premiums collected minus those transferred to reinsurers. This metric is crucial for assessing the core insurance business.

Over the past five years, Fidelity National Financial’s net premiums earned have decreased by an average of 1.6% per year, underperforming the broader insurance sector. This suggests that their policy underwriting has lagged behind other segments of the business.

Fidelity National Financial Trailing 12-Month Net Premiums Earned

2. Earnings Per Share Are Declining

Tracking the long-term trend in earnings per share (EPS) helps determine if a company’s growth is translating into real profitability. Sometimes, revenue increases can be driven by heavy spending rather than genuine business strength.

Unfortunately, Fidelity National Financial’s EPS has fallen by 1.3% annually over the last five years, even as revenue expanded by 6%. This indicates that the company’s profitability per share has weakened as it has grown.

Fidelity National Financial Trailing 12-Month EPS (Non-GAAP)

3. Slow Book Value Growth Signals Limited Asset Expansion

Book value per share (BVPS) is a key indicator of an insurer’s financial health, reflecting the net assets available to shareholders after all liabilities are deducted.

For Fidelity National Financial, BVPS has only increased by 4.1% per year over the past two years—a pace that may disappoint investors looking for stronger asset growth.

Fidelity National Financial Quarterly Book Value per Share

Our Verdict

Overall, Fidelity National Financial does not meet our standards for business quality. The recent price drop has brought the stock to 1.4 times its forward price-to-book ratio (or $49.21 per share), which is a fair valuation. However, we do not see a compelling opportunity at this time and believe there are more attractive options available. Consider exploring one of our top-rated software stocks instead.

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