A Look at First Advantage’s Valuation After Strong Q3 Results and Raised 2025 Earnings Guidance

First Advantage (FA) just announced third-quarter earnings, delivering much stronger sales than last year and moving back into profitability for the quarter. The company also narrowed its full-year 2025 earnings guidance upward, citing realized synergies as the driver.

See our latest analysis for First Advantage.

Despite today’s fundamental progress, First Advantage shares have stumbled this year with a 32.8% year-to-date share price decline. Management just guided earnings higher and returned the company to profitability this quarter. Still, longer-term total shareholder returns remain positive since the IPO, so momentum could shift if execution stays on track and sentiment improves.

If renewed profitability has you considering potential turnaround stories, it may be a great time to broaden your search and discover fast growing stocks with high insider ownership

With shares trading at a notable discount to analyst targets and improving fundamentals, investors now must ask themselves whether First Advantage is undervalued or if the market is already accounting for the company’s brighter outlook.

Most Popular Narrative: 30.7% Undervalued

Compared to the recent close of $12.38, the most widely followed narrative values First Advantage at a much higher fair value. This suggests the stock may be pricing in a turnaround. Let’s explore the underlying catalyst driving this valuation.

Ongoing investments in proprietary AI-enabled technology, automation, and integrated platforms (particularly following the Sterling acquisition) are unlocking operational efficiencies and enabling more high-margin value-added services. This creates potential for margin expansion and higher net earnings.

Read the complete narrative.

Want to know what supports this bullish price target? The secret sauce lies in ambitious forecasts for margin expansion and significant earnings growth assumptions. The full narrative reveals exactly which metrics move the needle for First Advantage’s fair value calculation. Find out what numbers set it apart from the pack.

Result: Fair Value of $17.86 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, ongoing hiring hesitancy and the highly competitive background screening industry could quickly undermine the margin and growth expectations that support this outlook.

Find out about the key risks to this First Advantage narrative.

Another View: Multiples Paint a Cautious Picture

Looking at First Advantage from a price-to-sales perspective, the story shifts. Shares currently trade at 1.5 times sales, just above both the US Professional Services industry average and its peers at 1.3 times. While the fair ratio stands at 1.6 times, the market’s slight premium suggests investors may already be pricing in a turnaround. Does this narrow gap offer enough upside compared to the risks?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own First Advantage Narrative

If you see a different angle or want to dig deeper into the data, you have the tools to build your own perspective in minutes. Do it your way

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding First Advantage.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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