A Look at First Advantage's Valuation After Upbeat Q3 Results and Raised Guidance

First Advantage (FA) reported third-quarter earnings that surpassed market expectations, supported by substantial year-on-year revenue growth and improved profitability. The company also raised its full-year guidance for both revenue and earnings.

See our latest analysis for First Advantage.

Fresh from its upbeat earnings report and tighter full-year guidance, First Advantage’s share price surged earlier in the week but has since cooled, posting a 5.4% gain over seven days. However, the stock still faces a sharp 11.3% retreat over the past month. Despite the stock’s bounce around quarterly updates and renewed investor interest after the Sterling acquisition, the longer view paints a mixed picture. There has been a 27.8% drop in year-to-date share price return, but a robust 20.4% total shareholder return over three years hints at underlying growth potential amid recent volatility.

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With the latest results and upgraded forecasts in hand, investors are left wondering whether First Advantage is trading at a discount to its intrinsic value or if the market has already priced in future growth potential. This raises the question of whether a possible buying opportunity exists.

Most Popular Narrative: 25.5% Undervalued

With First Advantage closing at $13.31 and the most-followed narrative calculating a fair value near $17.86, there is a sizable gap in the company’s perceived worth. The narrative draws on forward-looking projections and key industry shifts that could reshape where the stock trades next.

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 is creating potential for margin expansion and higher net earnings.

Read the complete narrative.

Want to know what powers this valuation leap? The narrative hinges on a radical turnaround in margins and a future earnings profile that is not typical for most peers. What is driving the conviction behind these bullish estimates? See the full story to uncover the assumptions that make this price target more than just wishful thinking.

Result: Fair Value of $17.86 (UNDERVALUED)

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

However, ongoing macroeconomic uncertainty and intense competition could dampen hiring volumes and place pressure on First Advantage’s revenue growth and profitability in the coming quarters.

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

Build Your Own First Advantage Narrative

If you see the story differently or want to dig deeper into the numbers, you can create a custom narrative in just a few minutes. Do it your way

A great starting point for your First Advantage research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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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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