First Advantage Corporation Earnings Missed Analyst Estimates: Here's What Analysts Are Forecasting Now

Shareholders might have noticed that First Advantage Corporation (NASDAQ:FA) filed its first-quarter result this time last week. The early response was not positive, with shares down 4.8% to US$15.99 in the past week. Things were not great overall, with a surprise (statutory) loss of US$0.02 per share on revenues of US$169m, even though the analysts had been expecting a profit. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for First Advantage

Taking into account the latest results, the current consensus from First Advantage's nine analysts is for revenues of US$782.7m in 2024. This would reflect a credible 3.3% increase on its revenue over the past 12 months. Per-share earnings are expected to surge 46% to US$0.33. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$782.5m and earnings per share (EPS) of US$0.30 in 2024. So the consensus seems to have become somewhat more optimistic on First Advantage's earnings potential following these results.

There's been no major changes to the consensus price target of US$18.08, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values First Advantage at US$21.00 per share, while the most bearish prices it at US$15.50. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that First Advantage's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 4.4% growth on an annualised basis. This is compared to a historical growth rate of 8.7% over the past three years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 5.7% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than First Advantage.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around First Advantage's earnings potential next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. The consensus price target held steady at US$18.08, with the latest estimates not enough to have an impact on their price targets.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple First Advantage analysts - going out to 2026, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with First Advantage , and understanding it should be part of your investment process.

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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.