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First Advantage Corporation (FA)
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First Advantage (FA) AI Stock Analysis

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FA

First Advantage

(NASDAQ:FA)

Rating:52Neutral
Price Target:
$16.50
▲(0.86% Upside)
First Advantage's overall stock score reflects strong earnings call performance and strategic initiatives, which are offset by profitability challenges and high leverage. Technical indicators and valuation metrics suggest caution, but robust cash flow growth and strategic debt management provide a positive outlook.
Positive Factors
Financial Performance
FA's 2Q results came in above expectations on the top and bottom line, as better performance from new logo wins and up-sell/cross-sell initiatives are helping the company outperform a challenging environment for base growth.
Market Position
First Advantage is recognized as the clear market leader, benefiting from scale advantages.
Strategic Initiatives
FA's plan to improve organic growth, reduce leverage, and focus on extracting synergies from the Sterling acquisition is viewed positively.
Negative Factors
Leverage Concerns
The current leverage ratio is seen as an overhang for the company.
Macroeconomic Environment
The macroeconomic environment is expected to remain a drag on top-line organic growth.
Market Volatility
The business’s exposure to macroeconomic factors makes it subject to share price volatility in the short term.

First Advantage (FA) vs. SPDR S&P 500 ETF (SPY)

First Advantage Business Overview & Revenue Model

Company DescriptionFirst Advantage (FA) is a leading global provider of technology solutions for screening, verifications, safety, and compliance related to human capital. Operating across multiple sectors, including employment, tenant, and gig economy screenings, First Advantage serves as a critical partner for businesses of all sizes by offering comprehensive background checks, drug testing, and identity verification services. With a focus on leveraging data-driven insights and advanced analytics, the company helps organizations make informed decisions that enhance the security and efficiency of their hiring processes.
How the Company Makes MoneyFirst Advantage generates revenue primarily through its wide array of screening and verification services tailored to meet the needs of various industries. The company's key revenue streams include employment background checks, which involve comprehensive assessments of candidates' criminal histories, education, and employment verifications. Additionally, tenant screening services provide landlords and property managers with critical insights to make informed leasing decisions. First Advantage also offers specialized solutions for the gig economy, providing background checks for freelance and temporary workers. Partnerships with businesses and organizations in need of large-scale screening solutions further bolster its revenue. The company's ability to integrate with clients' human resources and tenant management systems enhances its service offerings and customer retention, contributing significantly to its earnings.

First Advantage Earnings Call Summary

Earnings Call Date:Aug 07, 2025
(Q2-2025)
|
% Change Since: |
Next Earnings Date:Nov 05, 2025
Earnings Call Sentiment Positive
The earnings call highlighted strong financial performance and successful integration of the Sterling acquisition, alongside high customer retention and international growth. However, challenges in base performance and macroeconomic uncertainty were noted. Overall, the achievements and forward momentum outweigh the challenges.
Q2-2025 Updates
Positive Updates
Strong Q2 Results
The company's Q2 revenues reached $391 million, up 1.5% versus last year on a pro forma basis, with adjusted EBITDA margin improving by 270 basis points to 29.2% and adjusted diluted EPS growing by 29% year-over-year.
Successful Integration of Sterling Acquisition
The integration of the $2.2 billion Sterling acquisition is ahead of schedule, with $47 million of synergies actioned and $10 million realized in Q2, contributing to a strong financial performance.
High Customer Retention
Customer retention remained high at over 96%, consistent with past results, demonstrating strong customer-centric focus.
International Growth
International segments performed well, growing by 7.2% in the quarter and outpacing the Americas in all phases of growth algorithm.
Strategic Focus on Digital Identity
Continued strong interest and sales in Digital Identity solutions, considered a major growth area with significant potential.
Negative Updates
Moderation in Base Performance
Base performance continued to moderate and remained negative on a year-on-year basis, impacted by a challenging macro environment.
Updated Base Growth Expectations
Due to evolving macroeconomic conditions, the company updated its second half base growth expectations to be slightly negative instead of modestly positive.
Macro Environment Uncertainty
Consistent and notable tone of uncertainty due to policy changes, including immigration, tariffs, and tax policy, affecting customer hiring plans.
Company Guidance
During the First Advantage Second Quarter 2025 Earnings Conference Call, the company provided a detailed guidance overview. They reaffirmed their full-year guidance, projecting revenues to be at or slightly better than the midpoint of their guidance range. Notably, the company delivered strong results in Q2, with adjusted EBITDA margins over 29% and nearly 30% year-over-year adjusted diluted EPS growth. The integration of the $2.2 billion Sterling acquisition is ahead of schedule, with $47 million in synergies actioned and $10 million realized in Q2. Retention rates remained high at over 96%, and upsell, cross-sell, and new logo rates aligned with long-term growth targets. Despite slightly negative base growth expectations for the second half, First Advantage expressed confidence in their ability to achieve robust results, supported by a diverse range of global verticals, successful execution of the FA 5.0 strategy, and significant synergy realization. Additionally, strategic debt management efforts, including a recent 50-basis-point repricing of their credit facility and voluntary debt repayments, were highlighted as part of their capital allocation strategy.

First Advantage Financial Statement Overview

Summary
First Advantage shows strong revenue growth, but faces profitability challenges with negative net income and margins. The balance sheet is stable with low leverage, but negative return on equity is concerning. Cash flow management issues are present due to declining growth rates in operating and free cash flow.
Income Statement
46
Neutral
The income statement shows a mixed performance. Revenue has grown significantly by 21.6% TTM over the previous year, indicating strong growth. However, the company is currently operating at a net loss with a negative net profit margin and EBIT margin, which raises concerns about profitability. The gross profit margin remains healthy at 47% TTM, suggesting good control over cost of goods sold. Despite the positive trend in revenue, the consistent net losses are a significant weakness.
Balance Sheet
58
Neutral
The balance sheet reflects moderate financial stability. The debt-to-equity ratio is low at 0.03 TTM, indicating low leverage, which is a positive sign. The equity ratio stands at 33%, which shows a reasonable portion of assets financed by equity. However, the return on equity is negative due to the net losses, which is a critical issue. Overall, the company's low leverage and decent equity position are strengths, but the negative profitability impacts the score.
Cash Flow
52
Neutral
The cash flow statement presents a mixed picture. Operating cash flow is positive, though significantly reduced in TTM compared to the previous year, indicating potential operational cash constraints. Free cash flow is positive at $3.43 million TTM, but the free cash flow growth rate is negative, which is concerning. The free cash flow to net income ratio cannot be evaluated due to negative net income. The ability to generate free cash flow is a strength, but the decline in operating cash flow and free cash flow growth are weaknesses.
BreakdownTTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue1.25B860.21M763.76M810.02M712.29M509.15M
Gross Profit519.78M411.29M376.98M401.10M360.13M76.05M
EBITDA182.85M83.15M210.99M232.52M195.13M88.96M
Net Income-150.11M-110.27M37.29M64.60M16.05M-84.02M
Balance Sheet
Total Assets3.87B3.92B1.63B1.89B1.89B1.76B
Cash, Cash Equivalents and Short-Term Investments184.34M168.69M213.77M393.61M293.58M154.09M
Total Debt2.14B2.16B567.74M569.49M554.85M785.30M
Total Liabilities2.57B2.62B723.92M759.21M754.34M969.42M
Stockholders Equity1.30B1.31B906.73M1.13B1.13B794.27M
Cash Flow
Free Cash Flow25.53M26.48M135.12M184.24M124.88M34.53M
Operating Cash Flow14.64M28.20M162.82M212.77M148.68M52.24M
Investing Cash Flow-1.66B-1.65B-66.85M-48.60M-72.43M-17.61M
Financing Cash Flow1.56B1.58B-273.56M-59.15M63.85M36.68M

First Advantage Technical Analysis

Technical Analysis Sentiment
Negative
Last Price16.36
Price Trends
50DMA
16.98
Negative
100DMA
16.63
Negative
200DMA
17.03
Negative
Market Momentum
MACD
-0.20
Positive
RSI
45.75
Neutral
STOCH
21.37
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For FA, the sentiment is Negative. The current price of 16.36 is below the 20-day moving average (MA) of 16.54, below the 50-day MA of 16.98, and below the 200-day MA of 17.03, indicating a bearish trend. The MACD of -0.20 indicates Positive momentum. The RSI at 45.75 is Neutral, neither overbought nor oversold. The STOCH value of 21.37 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for FA.

First Advantage Risk Analysis

First Advantage disclosed 45 risk factors in its most recent earnings report. First Advantage reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

First Advantage Peers Comparison

Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
76
Outperform
$2.00B68.0222.58%4.19%48.69%
75
Outperform
$3.06B39.364.30%2.07%3.52%-67.27%
74
Outperform
$3.17B21.847.15%0.78%4.18%18.93%
65
Neutral
$3.48B37.227.84%46.49%-25.62%
64
Neutral
$10.75B15.738.16%1.99%2.83%-14.82%
60
Neutral
$1.37B429.853.03%-2.99%-72.13%
52
Neutral
$2.85B549.40-13.57%65.34%-633.72%
* Industrials Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
FA
First Advantage
16.36
-2.55
-13.48%
ABM
ABM Industries
49.17
-6.49
-11.66%
CBZ
CBIZ
64.54
-8.61
-11.77%
UNF
UniFirst
177.82
-6.93
-3.75%
BV
BrightView Holdings
14.40
-1.11
-7.16%
LZ
LegalZoom
11.08
4.62
71.52%

First Advantage Corporate Events

Private Placements and FinancingBusiness Operations and Strategy
First Advantage Reduces Interest Rates on Credit Facilities
Positive
Aug 4, 2025

On July 30, 2025, First Advantage Holdings, LLC, a subsidiary of First Advantage Corporation, executed Amendment No. 5 to its first lien credit agreement originally dated January 31, 2020. The amendment reduced the interest rates on both the term loan facility due in 2031 and the $250 million revolving credit facility due in 2029 by 0.50%, potentially lowering borrowing costs and improving financial flexibility for the company.

Shareholder Meetings
First Advantage Holds 2025 Annual Stockholders Meeting
Neutral
Jun 9, 2025

On June 6, 2025, First Advantage Corporation held its 2025 Annual Meeting of Stockholders, where approximately 96% of the shares entitled to vote were represented. During the meeting, stockholders elected Class I directors for a three-year term, ratified Deloitte & Touche LLP as the independent public accounting firm for 2025, and approved the compensation of named executive officers on a non-binding basis.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Aug 27, 2025