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

While First Advantage Corporation (NASDAQ:FA) may not be the largest stock by market cap, its share price has seen some significant movements over the past few months on the NASDAQGS, rising to highs of US$16.85 and dropping to lows of US$14.77. Some share price movements can give investors a better opportunity to enter the stock and potentially buy at a lower price. One question that needs to be answered is whether First Advantage’s current share price of US$15.92 reflects the true value of the average market cap? 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

Is First Advantage still cheap?

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 since there isn’t enough information to reliably forecast the stock’s cash flows. We find that First Advantage’s ratio of 71.21x is higher than its peer average of 24.38x, suggesting that the stock is trading at a premium relative to the Professional Services industry. But is there another opportunity to buy low in the future? Given that First Advantage’s stock is quite volatile (i.e. its price movements are magnified relative to the rest of the market), this could mean that the price can move lower, 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 of First Advantage look like?

Future outlook is an important aspect when considering a stock, especially if you are an investor looking for growth in your portfolio. While value investors argue that it is the intrinsic value relative to the price that matters most, a more compelling investment thesis would be high growth potential at a cheap price. With earnings growth expected to be 99% over the next two years, the future looks bright for First Advantage. It appears that higher cash flows are on the horizon for the stock, which should translate into a higher stock valuation.

What this means for you

Are you a shareholder? FA’s optimistic growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking themselves a different question: Should I sell? If you think FA should trade below its current price, selling high and buying back when its price returns to the industry’s price-to-earnings ratio may be profitable. But before making that decision, check whether its fundamentals have changed.

Are you a potential investor? If you’ve been watching FA for a while, now might not be the best time to get in on the stock. The price has outpaced its industry peers, meaning there’s likely no further upside in the event of a pricing mistake. However, the positive outlook is encouraging for FA, meaning it’s worth looking more deeply at other factors in order to take advantage of the next price drop.

Keep in mind that when it comes to analyzing a stock, it is worth noting the risks involved. Every company has risks, and we have spotted 1 warning sign for First Advantage you should know about.

If you’re 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.

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

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