FA Stock Forecast & Price Target

First Advantage Corp is well-positioned for growth, driven by a strong customer base that benefits from an enhanced product portfolio, leading to a gross retention rate exceeding 96%. The employment background screening industry is projected to grow at a compound annual growth rate (CAGR) of 6%, attributed to rising hiring trends, increased adoption of post-onboarding services, and expansion into underpenetrated international markets. Additionally, management has revised its expectations for post-acquisition revenue synergies to $60-$70 million, alongside anticipated improvements in pro-forma margins from 27% to 30-31% by FY27.

First Advantage Corp is facing significant challenges that contribute to a negative outlook on its stock, primarily due to a projected 10% decrease in its forward-looking price-to-earnings multiple alongside expectations of declining earnings per share. The ongoing macroeconomic slowdown has resulted in a weaker-than-expected hiring environment, contributing to revenue declines particularly in its Sterling segment, which experienced a roughly 12% decline compared to an 8% drop in the broader company. Additionally, the company faces substantial risks including sluggish achievement of strategic priorities, pressures on EBITDA margins from soft topline growth, and potential ownership overhang from Silver Lake’s substantial stake, all of which could hinder the company's financial performance moving forward.