FA · First Advantage
Conviction · Medium · more likely to lead the S&P 500 over the next three months, by a modest margin
Wrong if: a daily close below $21.25
Note written ·
Price against the kill line
1.1% clear of its kill line on the 13 November 2026 close.
How to read this
The red mark is the price level of the published kill line: a close through it (a weekly close, on a weekly line) would prove the research note wrong on price. The dot is where the stock closed on 13 November 2026; a dot left of the mark has closed through its line.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close below $21.25, on record since 10 November 2026. The shares are up 5.8% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close below $21.25, the close that preceded the third-quarter report, which would erase the post-report gain and show sponsor supply outweighing the guidance raise. A cut to the $1.72–1.745 billion revenue range, or existing-customer growth below 6.7%, would also break the case.
Research onlyNot in the portfolio.
Catalyst
Key figures from the filings · Technology
Quarter to 30 September 2026, filed 5 November 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 466
- Revenue, change on a year (%)
- +13.8
- Operating margin (%)
- 12.9
- Free cash flow, four quarters ($M)
- 238
- Net cash, cash less debt ($M)
- −1,750
- Price to earnings (×)
- 85.8
- Enterprise value to sales (×)
- 3.2
- Enterprise value to operating income (×)
- 27.8
All filed numbers
What First Advantage reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Operating margin (%) |
|---|---|---|---|
| first filed | 466 | +13.8 | 12.9 |
| first filed | 449 | +14.9 | 12.7 |
| first filed | 385 | +8.6 | 8.7 |
| first filed | 420 | +36.8 | 10.7 |
| first filed | 409 | +105.5 | 10.3 |
| first filed | 391 | +111.7 | 9.7 |
| Pre-tax income ($M) | 29.1 |
| Net income ($M) four quarters: 43.0 | 20.5 |
| Diluted shares, change on a year (%) against the quarter to 30 September 2025 | −0.1 |
| Operating cash flow ($M) | 253 |
| Capital spending ($M) | 14.8 |
| Free cash flow ($M) | 238 |
| Cash and short-term investments ($M) | 241 |
| Debt ($M) non-current long-term debt | 1,991 |
| Net cash, cash less debt ($M) | −1,750 |
| Deferred revenue ($M) −2.0% on a year | 4.8 |
| Backlog, orders not yet delivered ($M) | Not reported |
| Receivables ($M) | 350 |
| Inventory ($M) | Not reported |
| Shareholders' equity ($M) | 1,325 |
| Market value ($M) | 3,694 |
| Enterprise value, market value plus net debt ($M) | 5,444 |
| Enterprise value to sales (×) | 3.2 |
| Enterprise value to operating income (×) | 27.8 |
| Price to earnings (×) | 85.8 |
| Price to book value (×) | 2.8 |
| Free-cash-flow yield (%) | 6.4 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 5.3% of shares outstanding sold short, 5.2 days of average trading to cover, −4.9% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $324.0M |
| 12 monthsfrom | $107K | $600.1M |
The thesis
First Advantage is modestly more likely than not to beat the S&P 500 over the next three months. The 5 November 2026 third-quarter report beat estimates and lifted 2026 revenue guidance to $1.72–1.745 billion, but the second Silver Lake sale of shares in three months, priced at $21.80 on 10 November 2026, now caps the shares. The next quarterly report and monthly US hiring data settle whether growth holds.
The shares closed at $23.52 on 9 November 2026, the day the 15 million-share secondary was announced. They closed at $21.58 on 10 November 2026 and $21.36 on 12 November 2026, below the offering price. The published kill line has not been crossed. The 12 November 2026 close is the lowest of the sessions since the report.
Two tests applied to the report: existing-customer growth of at least the 6.7% reported for the second quarter, and an intact $1.67–1.71 billion revenue range. The range passed with room to spare. The earnings release gives no base-growth percentage, so the first test is unconfirmed. A panabee.com summary of the results puts existing customers at 9.8 percentage points of the 13.8% total growth and new customers at 4.0 points.
The shares are down 1.0% over three months (adjusted daily closes, from the 14 August 2026 close of $21.58). That is the net of a sponsor-supply drop and a post-report rally. Operating results are strong while the share price has made no progress.
Bullish and bearish views on First Advantage Corporation
The bull case on First Advantage Corporation (FA), in brief: the quarter beat on revenue and earnings. The bear case: Silver Lake sold again at a lower price.
Bull case
- The quarter beat on revenue and earnings. Revenue was $465.8 million, up 13.8% from a year earlier, against $409.15 million in the third quarter of 2025 (10-Q filed 5 November 2026). Adjusted diluted earnings per share (EPS) were $0.38 against $0.30 a year earlier.
- Guidance rose above the prior ceiling. The 2026 revenue range moved to $1.72–1.745 billion from $1.67–1.71 billion. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation) moved to $488–498 million from $472–486 million, and adjusted EPS to $1.30–1.33 from $1.23–1.29. The low end of each new range sits above the high end of the old one.
- Margins widened. Adjusted EBITDA was $136.5 million, up 15.2%, at a 29.3% margin, against $128.5 million at 28.6% in the second quarter. Adjusted net income rose 28.6% to $67.3 million.
- Cash generation is steady. Operating cash flow was $63.8 million in the quarter and $186.8 million over nine months. Long-term debt fell to $1,990.9 million at 30 September 2026 from $2,033.8 million at 30 June 2026, after a $45 million prepayment.
- Analyst targets sit well above the price. On 6 November 2026 Barclays kept its overweight rating and raised its target to $34. Needham kept its buy rating and raised its target to $30. On 10 November 2026 Citigroup kept a neutral rating and raised its target to $25. All three targets are above the $21.36 close of 12 November 2026.
- The company is adding product depth. On 5 November 2026 First Advantage announced the purchase of Data Diver Technologies, an AI and automation platform for criminal and court records, for about $125 million. The 20 October 2026 ID.me identity-verification partnership points the same way.
Bear case
- Silver Lake sold again at a lower price. Silver Lake affiliates priced 15 million shares at $21.80 on 10 November 2026, after 12,500,000 shares at $22.20 on 11 August 2026. First Advantage sold no shares and received no proceeds. The shares closed below the November offering price on 10 November 2026, 11 November 2026 and 12 November 2026.
- The sponsor remains a seller. A resale prospectus filed 10 August 2026 covers up to 87,450,000 shares. Two sales within three months show the pattern of selling into strength.
- Insiders have been net sellers. GuruFocus reported net insider selling of $276.0 million over twelve months against $0.1 million of buying, as of 28 September 2026. SEC Form 4 filings from 22 October to 10 November 2026 show option exercises by the Chief Operating Officer and Chief Financial Officer, with 4,074 shares withheld for tax at $23.53 by the Chief Financial Officer.
- US hiring is slowing. The US Bureau of Labor Statistics (BLS) reported a 29,000 payroll gain for September 2026, against a prior 12-month average of 45,000, and a 4.2% unemployment rate. Screening volumes follow hiring.
- Debt and acquisitions add leverage. Long-term debt was $1,990.9 million against $240.9 million of cash at 30 September 2026. panabee.com reported that the Data Diver purchase was funded in part with $45 million of revolver borrowings.
- Growth slowed slightly. Revenue growth was 13.8% in the third quarter against 14.9% in the second. The company did not publish a base-growth percentage in the release.
Price setup
The shares closed at $21.36 on 12 November 2026. That is 15.1% below the 52-week intraday high of $25.15 set on 7 August 2026, and well above the 52-week closing low of $8.95 on 23 February 2026. The 50-day average is $20.41 and the 200-day average is $16.70, both as of 12 November 2026 and both below the last close.
The closes since the report show the gap-down on the secondary. They were $23.13 on 5 November 2026, $23.53 on 6 November 2026, $23.52 on 9 November 2026, then $21.58, $21.55 and $21.36 on the next three sessions. The $21.80 offering price is the nearest reference above the close. The 50-day average and the published kill line sit just below it.
Three-month performance is flat to slightly negative against the index case, so the shares have not yet shown the leadership the guidance raise implies. The next company-specific data points are the November investor conferences. The next quarterly report falls outside the next 30 days.
Catalysts ahead
- 17 November 2026: J.P. Morgan Ultimate Services Investor Conference, management webcast at 9:00 a.m. ET. First investor forum after the report and the secondary; management comment on fourth-quarter hiring volumes, Data Diver and the ID.me product.
- 18 November 2026: RBC Capital Markets Global Technology, Internet, Media and Telecommunications Conference, webcast at 11:20 a.m. ET. Second post-report forum; any change in tone on demand or capital allocation would show here.
- ~4 December 2026 (est.): BLS November 2026 Employment Situation report. Gives the next reading on US hiring, the main outside driver of screening volumes.
What would change the view
A daily close below $21.25, the close that preceded the third-quarter report, which would erase the post-report gain and show sponsor supply outweighing the guidance raise. A cut to the $1.72–1.745 billion revenue range, or existing-customer growth below 6.7%, would also break the case.
The risks this note tracks, each with what would confirm it:
- Screening demand from existing customers weakens after a strong third quarter, with the base-growth rate never disclosed in the release. Confirmed by: management at the November conferences or the fourth-quarter report citing existing-customer growth below the 6.7% reported for the second quarter.
- Further sponsor sales add to the shares available for sale, after secondaries at $22.20 in August and $21.80 in November. Confirmed by: a new secondary-offering announcement or prospectus supplement documenting Silver Lake sales beyond the 10 November 2026 transaction.
- A US hiring slowdown hits a business carrying about $2 billion of long-term debt plus new revolver borrowings. Confirmed by: a negative or sub-29,000 BLS payroll report alongside company comment on lower screening volumes.
- Analysts with neutral views, such as Citigroup, set targets near the current price, limiting upside from estimate changes. Confirmed by: further target cuts or downgrades after the November conferences, or the fourth-quarter report coming in below the guided range.
What it trades with
First Advantage revenue tracks US hiring volume, so the BLS payroll report is the most frequent outside input. Its debt load makes the shares sensitive to credit conditions and to small-cap equity moves. Silver Lake's ownership links share-supply news to the stock independent of operating results. The business is not driven by AI spending, though the Data Diver and ID.me deals add AI-based products to the screening line.
The evidence, claim by claim (8)
- Third-quarter 2026 revenue $465.8 million, up 13.8% from a year earlier; adjusted diluted EPS $0.38 versus $0.30; adjusted EBITDA $136.5 million at a 29.3% margin. First Advantage third-quarter 2026 results release · as of
- 2026 guidance raised to revenue $1.72–1.745 billion (from $1.67–1.71 billion), adjusted EBITDA $488–498 million (from $472–486 million), adjusted diluted EPS $1.30–1.33 (from $1.23–1.29). First Advantage third-quarter 2026 results release · as of
- Cash and equivalents $240.9 million and long-term debt $1,990.9 million at quarter end, after a $45 million debt prepayment in the quarter. First Advantage third-quarter 2026 results release · as of
- Silver Lake affiliates priced an underwritten secondary of 15 million First Advantage shares at $21.80; the company sold no shares. First Advantage pricing announcement, 10 November 2026 · as of
- Citigroup kept a neutral rating on First Advantage and raised its price target to $25. Analyst-action headlines, 10 November 2026 · as of
- Barclays kept overweight and raised its target to $34; Needham kept buy and raised its target to $30. Analyst-action headlines, 6 November 2026 · as of
- Chief Financial Officer Steven Marks exercised options on 13,652 shares on 8 November 2026, with 4,074 shares withheld for tax at $23.53. SEC Form 4 filed 10 November 2026 · as of
- US nonfarm payrolls rose 29,000 in September 2026 against a prior 12-month average gain of 45,000; unemployment rate 4.2%. BLS Employment Situation Summary, September 2026 · as of
Sources
- First Advantage Reports Third Quarter 2026 Results · menafn.com ·
- First Advantage Announces Secondary Offering of Common Stock · investors.fadv.com
- FIRST ADVANTAGE CORP - Form FWP - FY2026 · sec.gov
- First Advantage Reports 14% Revenue Growth and Upgrades FY2026 Outlook · panabee.com
- FIRST ADVANTAGE CORP - Form 8-K - FY2026 · sec.gov