Stifel maintains Buy on First Advantage stock, $20 target

Wednesday, Stifel analysts reiterated a Buy rating on First Advantage (NASDAQ:FA) shares, maintaining a $20.00 price target, representing significant upside from the current price of $13.45. The endorsement follows a series of meetings with the company’s CEO and CFO. With a market capitalization of $2.33 billion and revenue growth of 12.63% in the last twelve months, Stifel’s analysis suggests that management is on track with the integration of the STER acquisition, likely to realize synergies faster than anticipated and potentially uncover additional benefits.

According to Stifel, the hiring landscape, while not worsening, is not showing signs of improvement either. The firm notes that First Advantage’s performance this quarter has so far met expectations. InvestingPro data shows the company maintains a healthy current ratio of 1.9, indicating strong short-term financial stability. Stifel also pointed out that if the broader economic conditions remain stable, 2025 is expected to be a year of stabilization, with more pronounced improvements in the second half, and 2026 is looking promising for revenue growth, EBITDA margin expansion, and strong EPS growth.

The analysts highlighted that First Advantage’s stock price is currently near its 52-week low of $12.55, with InvestingPro analysis indicating the stock is in oversold territory. According to InvestingPro’s Fair Value assessment, the stock appears slightly overvalued at current levels, though analysts maintain price targets ranging from $13 to $22. They emphasized that as growth resumes and STER synergy costs are realized, the company’s leverage should decrease, potentially leading to a significant rise in the stock price. Discover 12 additional exclusive ProTips and comprehensive analysis with an InvestingPro subscription.

Stifel suggested that factors such as exceeding expectations on STER acquisition synergies, gaining investor confidence in achieving 2025 targets, and a downward trend in leverage could contribute to a positive shift in First Advantage’s stock valuation. These elements, combined with the current market positioning and the stock’s 32% decline over the past six months, present a potential upside for the company’s shares. Access First Advantage’s complete Pro Research Report, part of InvestingPro’s coverage of 1,400+ US stocks, for deeper insights into the company’s valuation and growth prospects.

In other recent news, First Advantage Corporation reported fourth-quarter earnings that did not meet analyst expectations, with adjusted earnings per share of $0.18 falling short of the anticipated $0.23. However, the company’s revenue of $307.1 million slightly exceeded estimates of $305.59 million, marking a 51.6% increase year-over-year. Despite these mixed results, First Advantage’s management remains optimistic about the future, highlighting a robust start to 2025 sales and pipeline development. The company has also increased the lower end of its synergy targets related to its acquisition of Sterling, projecting cost savings and operational efficiencies. Analyst firms have adjusted their price targets for First Advantage, with Jefferies lowering its target to $13 and maintaining a Hold rating, while BMO Capital Markets set a new target of $22 with an Outperform rating. Stifel also revised its price target to $20, maintaining a Buy rating, citing potential long-term value as hiring trends stabilize. First Advantage’s guidance for fiscal year 2025 suggests adjusted earnings per share between $0.86 and $1.03, below the $0.98 consensus, with projected revenue ranging from $1.5 billion to $1.6 billion. The company plans to focus on integration, customer continuity, and reducing net leverage amid an uncertain macroeconomic environment.

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