William Blair initiated research coverage of First Advantage Corporation (FA $15.32), a leading global provider of technology-enabled background screening products.
Analyst Andrew Nicholas estimated that the company would generate revenue of $771 million in 2024, an increase from $764 million in 2023, and rising to $832 million in 2025.
“As the largest background screener in the world, First Advantage has best-in-class technology and proprietary data, both of which enable a peer-leading margin profile,” said Nicholas. “Over the medium term, we expect First Advantage’s growth to be driven by a diverse set of factors including growth in existing clients’ hiring activities; the addition of new logos, primarily from midsize and small players; upsell of new products and solutions, such as identity verification and drug screening; and continued international penetration.
“First Advantage should benefit from a sizable addressable market, with our estimate of the core background screening market at roughly $4.5 billion-$6.0 billion in size, which we believe can grow solidly in the mid- to upper single digits over a full cycle,” added Nicholas. “Market growth is enhanced by several secular trends, including 1) increasing hiring and job turnover, 2) growth in the gig economy, 3) increased frequency of background screens, and 4) heightened regulation and compliance scrutiny tied to hiring practices. In addition, we believe the company’s pending acquisition of Sterling, the second-largest background screening company globally, will drive increased benefits from scale and increased diversification, and will also enable considerable revenue and cost synergies.”
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