First Advantage Corporation Just Missed Earnings - But Analysts Have Updated Their Models
First Advantage Corporation (NASDAQ:FA) shareholders are probably feeling a little disappointed, since its shares fell 8.5% to US$15.81 in the week after its latest annual results. It looks like the results were a bit of a negative overall. While revenues of US$764m were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 9.2% to hit US$0.26 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Check out our latest analysis for First Advantage
After the latest results, the seven analysts covering First Advantage are now predicting revenues of US$786.8m in 2024. If met, this would reflect a satisfactory 3.0% improvement in revenue compared to the last 12 months. Per-share earnings are expected to increase 9.0% to US$0.28. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$818.9m and earnings per share (EPS) of US$0.42 in 2024. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a large cut to earnings per share estimates.
Despite the cuts to forecast earnings, there was no real change to the US$16.92 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values First Advantage at US$19.00 per share, while the most bearish prices it at US$15.50. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that First Advantage's revenue growth is expected to slow, with the forecast 3.0% annualised growth rate until the end of 2024 being well below the historical 13% p.a. growth over the last three years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 6.4% annually. Factoring in the forecast slowdown in growth, it seems obvious that First Advantage is also expected to grow slower than other industry participants.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for First Advantage. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for First Advantage going out to 2025, and you can see them free on our platform here.
Before you take the next step you should know about the 1 warning sign for First Advantage that we have uncovered.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
