Last week, you might have seen that First Advantage Corporation (NASDAQ:FA) released its annual result to the market. The early response was not positive, with shares down 9.0% to US$15.81 in the past week. Revenues of US$764m were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at US$0.26, missing estimates by 9.2%. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
After the latest results, the seven analysts covering First Advantage are now predicting revenues of US$786.9m in 2024. If met, this would reflect an okay 3.0% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to accumulate 9.3% 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. The analysts seem less optimistic after the recent results, reducing their revenue forecasts and making a large cut to earnings per share numbers.
Despite the cuts to forecast earnings, there was no real change to the US$16.93 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values First Advantage at US$19.00 per share, while the most bearish prices it at US$15.50. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting First Advantage is an easy business to forecast or the the analysts are all using similar assumptions.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the First Advantage's past performance and to peers in the same industry. 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. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 6.4% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than First Advantage.
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. The consensus price target held steady at US$16.93, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on First Advantage. Long-term earnings power is much more important than next year's profits. We have forecasts for First Advantage going out to 2025, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 1 warning sign for First Advantage you should know about.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.