Is it too late to consider buying First Advantage Corporation (NASDAQ: FA)?

Although First Advantage Corporation (NASDAQ:FA) may not have the largest market capitalization, its stock price has seen significant movements over the past few months on the NASDAQGS, reaching a high of 17, US$37 and a low of US$14.77. Certain stock price movements can give investors a better opportunity to enter the stock and potentially buy at a lower price. It’s worth asking whether First Advantage’s current price of US$16.06 reflects the true value of the mid-cap company. Or is it currently undervalued, giving us an opportunity to buy? Let’s take a look at First Advantage’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for First Advantage

What is the opportunity for the first advantage?

First Advantage is currently expensive based on our price multiple model, where we look at the company’s price-to-earnings ratio relative to the industry average. In this case, we used the price-to-earnings (PE) ratio because there is not enough information to reliably forecast the stock’s cash flows. We note that First Advantage’s ratio of 71.84x is higher than its peer average of 25.28x, suggesting that the stock is trading at a premium to the Professional Services industry. But is there another opportunity to buy cheap in the future? Since First Advantage stock is quite volatile (meaning its price movements are magnified relative to the rest of the market), this could mean the price can fall, giving us another chance to ‘buy in the future. This is based on its high beta, which is a good indicator of stock price volatility.

What does the future look like for First Advantage?

NasdaqGS: FA Profit and Revenue Growth as of June 1, 2024

Investors looking for growth in their portfolio may want to consider a company’s prospects before buying its shares. Buying a great company with a strong outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. With earnings expected to grow 99% over the next two years, the future looks bright for First Advantage. It looks like higher cash flow is on the cards for the stock, which should translate into a higher share valuation.

What this means for you

Are you a shareholder? FA’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this raises another question: is now the right time to sell? If you think FA should trade below its current price, selling high and buying it back when its price falls towards the industry PE ratio can be profitable. But before making this decision, check if its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on FA for a while, now might not be the best time to get into the stock. The price has outperformed its industry peers, meaning there is likely no longer any upside from mispricing. However, the optimistic outlook is encouraging for FA, which means it is worth delving deeper into other factors in order to take advantage of the next price drop.

So if you want to dig deeper into this stock, it’s crucial to consider the risks it faces. In conducting our analysis, we found that First Advantage has 1 warning sign and it would be unwise to ignore it.

If you are no longer interested in First Advantage, you can use our free platform to view our list of over 50 other stocks with high growth potential.

The assessment is complex, but we help to simplify it.

Find out if First Advantage is potentially overvalued or undervalued by checking out our full analysis, which includes fair value estimates, risks and warnings, dividends, insider trading and financial health.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to constitute financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your objectives or your financial situation. Our goal is to provide you with targeted, long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.