First Advantage Corp

First Advantage demonstrated strong performance with organic revenue growth of 9%, EBITDA growth of 14%, and adjusted EPS growth of 52% year-over-year, all exceeding expectations. The stock has rebounded significantly, and despite this, our view remains unchanged: we believe this is an $80+ stock in five years. The company's fundamentals and growth trajectory support this outlook, indicating a strong investment opportunity.

First Advantage delivered an outstanding Q4. Organic growth accelerated meaningfully to 12% year over year, a sharp improvement from negative growth entering 2025, and management remains confident in the company’s forward trajectory. Despite this progress, the shares have sold off materially amid concerns that AI could negatively impact the business. We believe these concerns are misplaced. In February the company announced a $100 million share repurchase program, reflecting confidence in both the business and the current valuation. We were very encouraged by these results and added to the position during Q1. Today, we believe First Advantage is trading at under 10x 2026 EPS for a business capable of compounding earnings at 20%+ annually over the next five years.

First Advantage is positioned to benefit from the normalization of its end markets, which we are beginning to see signs of. The company, along with others in our portfolio, has the potential to more than triple over the next three to five years. This optimism is based on the strongest organic growth the company has delivered in years, indicating that the industry may be entering a period of sustained recovery. We believe that First Advantage's business model and market positioning will allow it to capitalize on these trends effectively.

First Advantage is the leading provider of employment background checks, having recently acquired Sterling Check, creating a market leader with ~25% share. The company is positioned for a cyclical recovery as hiring trends normalize, which we believe will lead to multi-year tailwinds. Additionally, management has revised synergy estimates from the Sterling deal upward to $60–70M, with potential for over $100M in cost synergies, driving significant shareholder value. Furthermore, deleveraging from current levels will enhance EPS growth, with the business expected to grow earnings over 20% annually, leading to multiple expansion and a target of ~$75, implying a ~400% return from current levels.

First Advantage is the leading provider of employment background checks and has recently acquired Sterling Check, creating a market leader with ~25% share. The company is positioned for multi-year tailwinds as hiring trends normalize after a downturn. Management has revised synergy estimates from the acquisition upward to $60–70M, with potential for over $100M in cost synergies, which could uplift EPS by 10%+. Additionally, deleveraging from current levels will significantly increase EPS, with the business expected to grow earnings over 20% annually. First Advantage trades at just 10x estimated 2026 EPS, suggesting substantial upside potential.

First Advantage is the leading provider of employment background checks, having recently acquired Sterling Check, creating a market leader with ~25% share. The company is positioned for a cyclical recovery as hiring trends normalize, which we believe will lead to multi-year tailwinds. Additionally, management has revised synergy estimates from the acquisition upward to $60–70M, with potential for over $100M in cost synergies, driving significant shareholder value. With a current leverage of ~5x net debt to EBITDA, deleveraging to 3x will enhance EPS growth, and we project earnings growth of over 20% annually, leading to multiple expansion.