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On Tuesday, Jefferies analyst Stephanie Moore revised the price target for First Advantage stock, trading on (NASDAQ:FA), to $13.00, marking a decrease from the previous $14.00 target. Currently trading at $14.16 with a market capitalization of $2.46 billion, the stock has experienced a significant 24% decline over the past week. Despite this adjustment, the firm has chosen to maintain its Hold rating on the shares.
First Advantage recently disclosed its fourth-quarter earnings, surpassing revenue forecasts but falling short on EBITDA compared to consensus estimates. According to InvestingPro data, the company achieved 12.63% revenue growth, though it currently trades at an elevated EV/EBITDA multiple of 53.11x. The company’s revenue guidance was reported to be more favorable than anticipated, while its EBITDA projections aligned with expectations.
The company also announced an increase in the lower end of their synergy expectations following the acquisition of Sterling, a move that indicates a positive adjustment to their anticipated cost savings and operational efficiencies from the merger. Additionally, First Advantage reiterated its commitment to reducing its debt, signaling a focus on improving its financial health. With a healthy current ratio of 1.9, the company maintains strong liquidity to meet its short-term obligations.
The revised price target by Jefferies reflects the mixed financial outcomes and the strategic steps First Advantage is taking in the wake of its recent acquisition. Based on InvestingPro’s Fair Value analysis, the stock appears fairly valued at current levels. The company’s efforts to enhance its financial position through deleveraging are noted as a continuing priority, with analysts expecting a return to profitability this year.
In other recent news, First Advantage Corporation reported fourth-quarter earnings that did not meet analyst expectations, with adjusted earnings per share at $0.18, missing the consensus of $0.23. However, the company’s revenue for the quarter was $307.1 million, slightly surpassing estimates of $305.59 million, marking a 51.6% increase year-over-year. For fiscal year 2025, First Advantage forecasts adjusted earnings per share between $0.86 and $1.03, falling short of the $0.98 consensus, and projects revenue in the range of $1.5 billion to $1.6 billion, below the anticipated $1.57 billion.
The company has also increased its synergy target range to $60 million to $70 million following its acquisition of Sterling. Despite the earnings miss, BMO Capital Markets adjusted its price target for First Advantage to $22 from $24, maintaining an Outperform rating, citing confidence in the company’s early 2025 performance and synergy achievements. Similarly, Stifel reduced its price target to $20 from $21 but held a Buy rating, noting potential long-term value from integration and sales effectiveness initiatives.
The company plans to address challenges in the hiring environment and focus on customer continuity and reducing net leverage. First Advantage’s management remains optimistic about a rebound in hiring trends to pre-pandemic levels, although they foresee base hiring challenges persisting through mid-2025. Investors are closely monitoring the company’s strategic efforts to navigate these headwinds and achieve its revised synergy targets.
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