First National Financial (TSX:FN) - Share price, News & Analysis

Q: What is the Fair Price of FN when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

FN (CA$33.67) is trading below our estimate of [[fair value]] (CA$72.64)

FN fundamental analysis
Snowflake Score
Valuation	3/6
Future Growth	1/6
Past Performance	2/6
Financial Health	0/6
Dividends	5/6

FN Stock Overview

First National Financial Corporation, together with its subsidiaries, originates, underwrites, and services commercial and residential mortgages in Canada.

Rewards

Trading at 53.6% below our estimate of its fair value

Earnings are forecast to grow 3.7% per year

Pays a high and reliable dividend of 10.69%

Risk Analysis

No risks detected for FN from our risk checks.

First National Financial Competitors

EQB

TSX:EQB

CA$1.9b

Home Capital Group

TSX:HCG

CA$1.1b

MCAN Mortgage

TSX:MKP

CA$533.6m

Atrium Mortgage Investment

TSX:AI

CA$494.9m

Price History & Performance

Summary of all time highs, changes and price drops for First National Financial
Historical stock prices
Current Share Price	CA$33.67
52 Week High	CA$50.99
52 Week Low	CA$32.12
Beta	1.2
1 Month Change	-7.58%
3 Month Change	-16.95%
1 Year Change	-32.01%
3 Year Change	6.79%
5 Year Change	24.47%
Change since IPO	236.36%

Shareholder Returns

	FN	CA Mortgage	CA Market
7D	-0.7%	-1.5%	-0.4%
1Y	-32.0%	-20.7%	-2.9%

Return vs Industry: FN underperformed the Canadian Mortgage industry which returned -19.5% over the past year.

Return vs Market: FN underperformed the Canadian Market which returned -2.6% over the past year.

Price Volatility

Is FN's price volatile compared to industry and market?
FN volatility
FN Average Weekly Movement	3.4%
Mortgage Industry Average Movement	3.2%
Market Average Movement	10.1%
10% most volatile stocks in CA Market	17.3%
10% least volatile stocks in CA Market	4.4%

Stable Share Price: FN is less volatile than 75% of Canadian stocks over the past 3 months, typically moving +/- 3% a week.

Volatility Over Time: FN's weekly volatility (3%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1988	1,636	Jason Ellis	https://www.firstnational.ca

First National Financial Corporation, together with its subsidiaries, originates, underwrites, and services commercial and residential mortgages in Canada. The company operates in two segments, Residential and Commercial segments. It offers single-family residential, and multi-unit residential and commercial mortgages.

First National Financial Fundamentals Summary

How do First National Financial's earnings and revenue compare to its market cap?
FN fundamental statistics
Market Cap	CA$2.02b
Earnings (TTM)	CA$192.90m
Revenue (TTM)	CA$734.73m

10.5x

P/E Ratio

3.6x

P/B Ratio

Is FN overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
FN income statement (TTM)
Revenue	CA$734.73m
Cost of Revenue	CA$202.22m
Gross Profit	CA$532.51m
Other Expenses	CA$339.60m
Earnings	CA$192.90m

Last Reported Earnings

Mar 31, 2022

Next Earnings Date

Jul 26, 2022

Earnings per share (EPS)	3.22
Gross Margin	72.48%
Net Profit Margin	26.26%
Debt/Equity Ratio	6,304.5%

How did FN perform over the long term?

See historical performance and comparison

Dividends

10.7%

Current Dividend Yield

72%

Payout Ratio

Does FN pay a reliable dividends?

See FN dividend history and benchmarks

When do you need to buy FN by to receive an upcoming dividend?
First National Financial dividend dates
Ex Dividend Date	Jun 29 2022
Dividend Pay Date	Jul 15 2022
Days until Ex dividend	0 days
Days until Dividend pay date	16 days

Does FN pay a reliable dividends?

See FN dividend history and benchmarks

We’ve recently updated our valuation analysis.

Valuation

Is FN undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

3/6

Valuation Score 3/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
PEG Ratio

Key Valuation Metric

Which metric is best to use when looking at relative valuation for FN?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for FN. This is calculated by dividing FN's market cap by their current preferred multiple.
What is FN's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	CA$2.02b

FN key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	n/a
Enterprise Value/EBITDA	n/a
PEG Ratio	2.8x

Price to Earnings Ratio vs Peers

How does FN's PE Ratio compare to its peers?

FN PE Ratio vs Peers

The above table shows the PE ratio for FN vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	7.7x
EQB EQB	6x	13.7%	CA$1.9b
HCG Home Capital Group	4.8x	6.1%	CA$1.1b
MKP MCAN Mortgage	8.3x	n/a	CA$533.6m
AI Atrium Mortgage Investment	11.6x	2.6%	CA$494.9m
FN First National Financial	10.5x	3.7%	CA$2.0b

Forward PE

Price-To-Earnings vs Peers: FN is expensive based on its Price-To-Earnings Ratio (10.5x) compared to the peer average (7.7x).

Price to Earnings Ratio vs Industry

How does FN's PE Ratio compare vs other companies in the North American Mortgage Industry?

Price-To-Earnings vs Industry: FN is expensive based on its Price-To-Earnings Ratio (10.5x) compared to the Canadian Mortgage industry average (8.3x)

Price to Earnings Ratio vs Fair Ratio

What is FN's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

FN PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	10.5x
Fair PE Ratio	11.3x

Price-To-Earnings vs Fair Ratio: FN is good value based on its Price-To-Earnings Ratio (10.5x) compared to the estimated Fair Price-To-Earnings Ratio (11.3x).

Share Price vs Fair Value

What is the Fair Price of FN when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: FN (CA$33.67) is trading below our estimate of fair value (CA$72.64)

Significantly Below Fair Value: FN is trading below fair value by more than 20%.

Price to Earnings Growth Ratio

PEG Ratio: FN is poor value based on its PEG Ratio (2.8x)

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Future Growth

How is First National Financial forecast to perform in the next 1 to 3 years based on estimates from 4 analysts?

Future Growth Score

1/6

Future Growth Score 1/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

3.7%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: FN's forecast earnings growth (3.7% per year) is above the savings rate (1.6%).

Earnings vs Market: FN's earnings (3.7% per year) are forecast to grow slower than the Canadian market (7.5% per year).

High Growth Earnings: FN's earnings are forecast to grow, but not significantly.

Revenue vs Market: FN's revenue (5.1% per year) is forecast to grow slower than the Canadian market (7% per year).

High Growth Revenue: FN's revenue (5.1% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: Insufficient data to determine if FN's Return on Equity is forecast to be high in 3 years time

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Past Performance

How has First National Financial performed over the past 5 years?

Past Performance Score

2/6

Past Performance Score 2/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

0.2%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: FN has high quality earnings.

Growing Profit Margin: FN's current net profit margins (26.3%) are lower than last year (33.7%).

Past Earnings Growth Analysis

Earnings Trend: FN's earnings have grown by 0.2% per year over the past 5 years.

Accelerating Growth: FN's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.

Earnings vs Industry: FN had negative earnings growth (-20.4%) over the past year, making it difficult to compare to the Mortgage industry average (7.2%).

Return on Equity

High ROE: Whilst FN's Return on Equity (29.79%) is high, this metric is skewed due to their high level of debt.

Discover strong past performing companies

Financial Health

How is First National Financial's financial position? (This company is analysed differently as a bank or financial institution)

Financial Health Score

0/6

Financial Health Score 0/6

Asset Level
Allowance for Bad Loans
Low Risk Liabilities
Loan Level
Low Risk Deposits
Level of Bad Loans

Financial Position Analysis

Debt to Equity History and Analysis

Balance Sheet

Financial Institutions Analysis

Asset Level: FN's Assets to Equity ratio (64.6x) is very high.

Allowance for Bad Loans: Insufficient data to determine if FN has a sufficient allowance for bad loans.

Low Risk Liabilities: FN reports no customer deposits, 100% of its liabilities are made up of higher risk sources of funding.

Loan Level: Insufficient data to determine if FN has an appropriate level of Loans to Assets ratio.

Low Risk Deposits: FN reports no customer deposits, loans are made up entirely of externally borrowed funds.

Level of Bad Loans: Insufficient data to determine if FN has an appropriate level of bad loans.

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Dividend

What is First National Financial current dividend yield, its reliability and sustainability?

Dividend Score

5/6

Dividend Score 5/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Future Dividend Coverage

10.69%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: FN's dividend (10.69%) is higher than the bottom 25% of dividend payers in the Canadian market (1.99%).

High Dividend: FN's dividend (10.69%) is in the top 25% of dividend payers in the Canadian market (5.27%)

Stability and Growth of Payments

Stable Dividend: FN's dividends per share have been stable in the past 10 years.

Growing Dividend: FN's dividend payments have increased over the past 10 years.

Current Payout to Shareholders

Earnings Coverage: With its reasonable payout ratio (72.4%), FN's dividend payments are covered by earnings.

Future Payout to Shareholders

Future Dividend Coverage: Insufficient data to determine if a dividend will be paid in 3 years or that it will be covered by earnings.

Discover strong dividend paying companies

Management

How experienced are the management team and are they aligned to shareholders interests?

6.0yrs

Average management tenure

CEO

Jason Ellis (50 yo)

2.58yrs

Tenure

CA$1,262,505

Compensation

Mr. Jason Ellis has been Chief Executive Officer and Director at First National Financial Corporation since January 12, 2022 and its President since November 11, 2019. Mr. Ellis is responsible for day to d...

CEO Compensation Analysis

Compensation vs Market: Jason's total compensation ($USD979.44K) is below average for companies of similar size in the Canadian market ($USD2.38M).

Compensation vs Earnings: Jason's compensation has been consistent with company performance over the past year.

Leadership Team

Experienced Management: FN's management team is seasoned and experienced (6 years average tenure).

Board Members

Experienced Board: FN's board of directors are seasoned and experienced ( 16 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: FN insiders have bought more shares than they have sold in the past 3 months.

Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/06/28 00:00
End of Day Share Price	2022/06/28 00:00
Earnings	2022/03/31
Annual Earnings	2021/12/31