First Advantage Corporation (FA): what the price requires
At today's price, First Advantage Corporation (FA) is priced for +21.4% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-19 · Source: https://boothcheck.com/report/FA
Headline
| Field | Value |
|---|---|
| Ticker | FA |
| Company | First Advantage Corporation |
| Current price | $20.41/sh |
| Composition | First Advantage Americas 44% / First Advantage International 7% / Sterling 49% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 5.6% |
| Operating margin today | 7.9% |
| Margin compression implied | -2.3pp |
| Implied growth | 21.4% |
| Multiple paid | 45x operating income |
The operating-margin requirement is derived from the framework's value band at year 5, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 7% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~10.9pp (computed at the 7% minimum rate; the CAPM rate 6.8% sits below it).
Reconcile: at the x-ray's 9.3% required return this reads ~9 years; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | +0.98σ |
| cohort percentile (of 178 peers) | 74 |
| sustained it ~5 years at this level | 40% |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 7.09x | 1 | expensive |
| Earnings | 12.68x | 3 | expensive |
| Relative | 0.78x | 5 | justifies |
| Growth | 0.58x | 3 | justifies |
Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.1%); the inversion above states its own rate.
Per-Model Detail (n=12)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $78.98 | 0.26x | yes | FCF base $0.2B, growth 25% (input: historical growth), terminal g 4.0%, WACC 7.1%, 7yr projection |
| DCF Exit Multiple | Growth | $35.36 | 0.58x | yes | Exit EV/EBITDA: 10.3x / 13.3x / 16.3x (bear / base = today's held flat / bull), 7yr |
| Relative Valuation | Relative | $26.17 | 0.78x | yes | P/E 77x (blended: static sector reference 35x + trailing (TTM) 418x), scenarios: 61.6x / 77.0x / 92.4x (bear / base = reference held flat / bull), EV/EBITDA 25x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $0.53 | 38.51x | yes | BV/sh $7.40, ROE (TTM) 0.7%, ke 9.3% (excluded from median) |
| Two-Stage Excess Return | Asset | $0.27 | 75.59x | yes | 5yr excess ROE then converge to ke=9.3% (excluded from median) |
| Discounted Future Market Cap | Growth | $29.61 | 0.69x | yes | Rev $1.6B, growth 30% (input: historical growth; tapered), Terminal P/S: 1.8x / 2.2x / 2.7x (bear / base = today's held flat / bull, cap 12x) |
| Peter Lynch Fair Value | Relative | $1.75 | 11.66x | yes | EPS $0.05, growth 35% (input: historical EPS growth), PEG=11.95 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $0.01 | 2041.00x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.08B × (1−34%) / WACC 7.1% → EPV (no growth) (excluded from median) |
| Residual Income | Asset | $0.19 | 107.42x | yes | BV $7.40 + 5yr PV of (ROE (TTM) 0.7% − Kₑ 9.3%) × BV; BV grows 0.4%/yr (excluded from median) |
| Graham Number | Asset | $2.88 | 7.09x | yes | √(22.5 × EPS $0.05 × BVPS $7.40) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $47.72 | 0.43x | yes | EBITDA $0.41B × sector EV/EBITDA 25.0x |
| FCF Yield | Earnings | $2.84 | 7.19x | yes | FCF $216.1M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $1.55 | 13.17x | yes | SBC-adj FCF $0.20B (FCF $0.22B − SBC $0.02B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $1.61 | 12.68x | yes | EPS $0.05 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $0.74 | 27.58x | yes | BV $7.40 × (ROIC 0.7% / WACC 7.1%) (excluded from median) |
| P/Sales Sector | Relative | $73.40 | 0.28x | yes | Revenue $1.61B × sector P/S 8.0x |
| PEG Fair Value | Relative | $1.87 | 10.91x | yes | EPS $0.05 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $0.54 | 37.80x | yes | EPS $0.05 / required return 9.3% (Rf 4.3% + ERP 5.0%) (excluded from median) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $1.9b |
| Net debt / NOPAT (after-tax) | 23.77x |
| Net debt / operating income (pre-tax) | 15.59x |
| Share count CAGR (dilution) | 3.5% |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
At $16.08 First Advantage trades at about 38x company-wide operating income, implying roughly 17.2% operating growth a year for five years; this is a forward bet that the now-completed Sterling Check integration converts into durable margin expansion, not a value name.
The 2025 revenue base jumped 83% to $1.57 billion via Sterling, operating cash flow was $195.1 million, and 2026 guidance targets adjusted EBITDA of $460 to $485 million (margin near 28%) with a $100 million buyback and $25 million debt prepayment; the bull case is integration synergies harvesting into profit.
The fragility is leverage plus cyclicality: net debt near $1.9 billion sits against thin trailing operating income (net-debt-to-operating-income about 12x), background screening tracks hiring activity, and the asset and earnings-power valuation families land near zero, so a margin miss or a hiring slowdown has a long way to fall.
Bull Case
The direction of travel at First Advantage is the cleanest part of the thesis. This is a background-screening and verification company whose 2025 revenue jumped to $1.57 billion, an 83% increase over the prior year's $860 million, driven by the Sterling Check acquisition that closed in late 2024. The company's filing describes the deal as extending its background screening, identity, and verification technology across customers and geographies, with Sterling valued at about $2.2 billion in cash and stock (accession 0000950170-25-029067). Two complementary franchises combined into one, and management has said core integration activities are now complete, which is the moment the cost synergies are supposed to start showing up in margin.
The cash generation backs the story. First Advantage reported operating cash flow of $195.1 million for the year, and alongside 2026 guidance the board approved a $100 million share repurchase and a $25 million voluntary debt prepayment. That combination, returning cash to holders while paying down acquisition debt, is what you want to see from a recently-levered roll-up: the business is throwing off enough cash to deleverage and buy back stock at the same time. The 2026 guide targets revenue of $1.625 to $1.700 billion, adjusted EBITDA of $460 to $485 million, and adjusted EPS of $1.15 to $1.25, an EBITDA margin near 28% at the midpoint.
At $16.08 the price implies company-wide operating growth of roughly 17.2% a year, which the inversion reads as within range, with the relative-multiple and growth-DCF families both reaching the price. The earnings trajectory that supports that bar is visible: a larger combined revenue base, integration synergies still to be harvested, and a management team already directing free cash flow toward buybacks and debt reduction. If the post-Sterling margin expansion lands as guided, the forward growth the price needs comes as much from profitability as from new sales.
Bear Case
The price is leaning on one assumption above all others: that the Sterling integration converts into durable margin expansion, fast. At $16.08 (June 27, 2026) the market is paying about 38x company-wide operating income and the inversion solves to roughly 17.2% operating-income growth a year for five years. That is the fragile beam. Background screening is a volume business tied to hiring activity, and hiring is cyclical; the 2026 guidance itself was received as cautious enough that the stock fell on a quarter that beat, which tells you the market is sensitive to any sign the growth bar is too high. If hiring softens, the revenue base that the synergy math sits on shrinks under it.
The balance sheet is the second fragility. The Sterling deal was financed with debt, and the solvency read shows net debt near $1.9 billion against thin trailing operating income, putting net-debt-to-operating-income around 12x and net-debt-to-NOPAT around 18x. Interest expense is not separately broken out in the latest filings, so coverage cannot be cleanly computed, which is its own caution. A roll-up carrying that much leverage needs the acquired earnings to show up on schedule; the $100 million buyback and $25 million voluntary prepayment are encouraging, but they are small relative to the debt load, and they compete with each other for the same free cash flow.
The valuation families underline how much is riding on the forward case. The growth and relative-multiple methods reach the price, but the asset-based and earnings-power families say expensive by a wide margin: earnings power value is effectively negligible and the excess-return models land near zero, because trailing return on equity is low after the acquisition loaded the balance sheet with goodwill and debt. There is also a measurement caution, with the EDGAR trailing operating income (about $158 million) and the record basis (about $258 million) diverging by more than 60%, so the 38x multiple the price implies depends heavily on which figure you anchor to. The most fragile assumption is simple: that integration synergies plus steady hiring lift margins enough to justify a high-30s operating multiple. Miss on either, and the floor is a long way down.
Valuation
First Advantage trades at about 38x company-wide operating income, which inverts to roughly 17.2% operating-income growth a year for five years at a 7% cost of capital. The inversion reads that as within range, but it is a demanding multiple that prices in a successful Sterling integration.
The method families split hard. The growth and relative-multiple families reach the price: relative valuation lands near $20 and the discounted future market-cap method near $23, anchored to a peer multiple and continued revenue growth. The asset and earnings-power families say the opposite and by a large margin: the excess-return models and earnings power value land near zero, because trailing return on equity is depressed after the acquisition loaded the balance sheet with goodwill and roughly $1.9 billion of net debt. A high operating multiple resting on a thin asset and earnings-power floor is the structural shape of a leveraged roll-up mid-integration.
The honest read: this is a forward bet on margin synergies, not a value name. The case works if the now-completed Sterling integration delivers the guided 2026 adjusted EBITDA of $460 to $485 million (a margin near 28%) and hiring activity stays firm enough to grow the top line. It fails if hiring softens or the synergies underwhelm, in which case the leverage amplifies the miss. One input caution: the EDGAR trailing operating income (about $158 million) and the record basis (about $258 million) diverge by more than 60%, so the implied multiple is sensitive to which base you use, and the cleaner anchor is management's adjusted-EBITDA and EPS guidance rather than a single trailing operating figure.
Catalysts
The most recent catalyst was the fourth-quarter and full-year 2025 report, which beat but sent the stock lower on a cautious 2026 outlook. Full-year 2025 revenue rose to $1.57 billion (up 83% on the Sterling acquisition), operating cash flow was $195.1 million, and management said core integration activities for Sterling are now complete (ChartMill, StockTitan).
Management introduced 2026 guidance of revenue $1.625 to $1.700 billion, adjusted EBITDA $460 to $485 million, adjusted net income $200 to $220 million, and adjusted diluted EPS $1.15 to $1.25. Alongside it, the board approved a $100 million share repurchase authorization and planned a $25 million voluntary debt prepayment, signaling a turn toward shareholder returns and gradual deleveraging after the debt-financed acquisition (StockTitan, ChartMill).
The forward catalysts cluster around two questions: whether the completed Sterling integration delivers the synergies baked into the margin guide, and whether hiring activity (the volume driver for background screening) stays firm. A subsequent quarter showed the stock up sharply on an earnings beat and integration progress, which tells you sentiment swings hard on each print. The next quarterly result, and any update on synergy capture versus the debt-paydown pace, are the clearest near-term catalysts (Simply Wall St, ChartMill).
Peer Cohorts (Per Segment, With Filing Citations)
First Advantage Americas / First Advantage International / Sterling (reported)
- EFX (EQUIFAX INC)
- FY2025 10-K: …us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember us-gaap:DefinedBenefitPlanRealEstateMember 2025-12-31 0000033185 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel12And3Member us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember us-gaap:DefinedBenefitPlanCashMember 2025-12-31…
- FY2025 10-K: …us-gaap:FairValueInputsLevel3Member 2024-12-31 0000033185 us-gaap:FixedIncomeSecuritiesMember 2024-12-31 0000033185 us-gaap:FixedIncomeSecuritiesMember us-gaap:FairValueInputsLevel1Member 2024-12-31 0000033185 us-gaap:FixedIncomeSecuritiesMember us-gaap:FairValueInputsLevel2Member 2024-12-31 0000033185…
- PAYC (Paycom Software, Inc.)
- FY2025 10-K: …of our goodwill and concluded that, as of June 30, 2025 , it was more likely than not that the fair value exceeded the carrying value and therefore goodwill was no t impaired. As of D ecember 31, 2025 and 2024, there were no indicators of impairment. In June 2021, in connection with our marketing initiatives, we…
- FY2025 10-K: …2025-01-01 2025-12-31 0001590955 2025-12-31 0001590955 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2024-01-01 2024-12-31 0001590955 us-gaap:USTreasurySecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2024-12-31 0001590955 payc:FurnitureFixturesAndEquipmentMember 2025-12-31 0001590955…
- PCTY (PAYLOCITY HOLDING CORPORATION)
- FY2025 10-K: …0001591698 06-30 2025 FY FALSE FALSE FALSE FALSE FALSE P2Y P3Y P5Y P5Y http://fasb.org/us-gaap/2025#AccruedLiabilitiesCurrent http://fasb.org/us-gaap/2025#AccruedLiabilitiesCurrent P3Y 6/30/2030 6/30/2045 6/30/2026 6/30/2045 iso4217:USD xbrli:shares iso4217:USD xbrli:shares xbrli:pure pcty:vote pcty:segment…
- FY2025 10-K: …the Illinois Biometric Information Privacy Act that overlap with claims in the first action. On June 13, 2025, the Company settled this matter without a material impact on the Company's financial statements. F-29 Table of Contents Additionally, from time to time, the Company is subject to litigation arising in the…
- TNET (TRINET GROUP, INC.)
- FY2025 10-K: …clients. Less than 1 % of our revenue is generated outside of the U.S. Basis of Presentation Our consolidated financial statements are prepared in conformity with generally accepted accounting principles in the United States of America (GAAP). All intercompany accounts and transactions have been eliminated in…
- FY2025 10-K: …our solutions; the failure of third-party service providers performing their functions; the failure to comply with anti-corruption laws and regulations, economic and trade sanctions and similar laws; the outcome of existing and future legal and tax proceedings; fluctuation in our results of operations, stock price…
- EXLS (EXLSERVICE HOLDINGS, INC.)
- FY2025 10-K: …exls:HistoricalVolatilitiesMonteCarloSimulationModelPerformanceRestrictedStockUnitsMember 2025-01-01 2025-12-31 0001297989 exls:AmendmentAndRestatementOfThe2006OmnibusAwardPlan2015PlanMember exls:RiskFreeInterestRateMonteCarloSimulationModelPerformanceRestrictedStockUnitsMember 2025-01-01 2025-12-31 0001297989…
- FY2025 10-K: …exls:CreditAgreementMember srt:MinimumMember 2024-01-01 2024-12-31 0001297989 us-gaap:SecuredDebtMember us-gaap:SecuredOvernightFinancingRateSofrMember exls:CreditAgreementMember srt:MaximumMember 2024-01-01 2024-12-31 0001297989 us-gaap:RevolvingCreditFacilityMember exls:CreditAgreementMember srt:MinimumMember…
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.