’Reddit is built for this moment’ - Stock soars on crushed earnings
On Thursday, Stifel analysts adjusted their outlook for First Advantage (NASDAQ:FA), reducing the price target on the company’s shares to $20 from the previous $21, while still holding a Buy rating on the stock. The stock has experienced significant pressure, declining over 13% in the past week to $16.27. According to InvestingPro data, the company trades at a notably high P/E ratio of 476x. The revision comes in the wake of the company’s fourth-quarter 2024 results and future guidance, which suggest an extended cyclical downturn in hiring that may be nearing its lowest point.
The analysts noted that despite the ongoing hiring slump, which has persisted longer than anticipated, there are signs of stabilization. This perspective is based on commentary from First Advantage’s clients and data from the Job Openings and Labor Turnover Survey (JOLTS). The company maintains strong financial health with a current ratio of 3.85 and operates with moderate debt levels. They believe that the hiring cycle will eventually improve, and that First Advantage’s ability to integrate and maintain sales effectiveness will drive long-term value following its combination with other entities. InvestingPro subscribers can access 12 additional key insights about First Advantage’s financial health and growth prospects.
The new price target represents an 11.5 times enterprise value to estimated 2026 earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), which aligns with the midpoint of historical valuations for private companies in the same sector. It also includes a three-turn valuation discount compared to the average 2026 EV/EBITDA valuations of peers TransUnion (NYSE:TRU) and Equifax (NYSE:EFX).
Stifel’s analysts anticipate that a rebound in hiring trends will likely lead to positive revisions in both earnings estimates and valuation multiples for First Advantage. The firm’s ongoing initiatives to integrate and drive sales effectiveness are expected to contribute to its long-term financial performance once the hiring environment begins to recover. With impressive gross profit margins of 49.5% and InvestingPro’s Fair Value analysis suggesting the stock is currently undervalued, First Advantage shows potential for long-term investors.
In other recent news, First Advantage Corporation reported fourth-quarter earnings that fell short of analyst expectations. The company posted adjusted earnings per share of $0.18, missing the analyst consensus of $0.23. However, revenue for the quarter was $307.1 million, slightly above the estimated $305.59 million and up 51.6% year-over-year. Looking ahead to fiscal year 2025, First Advantage provided guidance with adjusted earnings per share projected between $0.86 and $1.03, which is below the $0.98 analyst consensus. The company also forecasts revenue between $1.5 billion and $1.6 billion, falling short of the $1.57 billion analysts were expecting. In a related development, First Advantage completed the acquisition of Sterling, which is expected to generate $60 million to $70 million in cost synergies. The company reported a net loss of $100.4 million for the quarter, largely due to $97.1 million in expenses related to the acquisition. First Advantage plans to focus on integration and reducing net leverage amid an uncertain macroeconomic environment.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.