Despite challenges in the broader labor market, BMO sees First Advantage as well-positioned for growth, supported by its dominant position in the employment background screening industry.

BMO initiates coverage with a price target of $24 for the background screening services provider.

While macroeconomic headwinds have weighed on pre-employment screening revenue, BMO points to early signs of recovery in hiring trends, including data from Job Openings and Labor Turnover Survey (JOLTS), the Atlanta Fed, and Challenger reports. These shifts, combined with easier comparisons in 2025, could drive revenue growth and margin expansion.

The acquisition of STER, completed on October 31, 2024, is a pivotal move, further consolidating FA’s leadership in a fragmented industry, BMO analysts said.

BMO views the deal as strategically complementary, with STER’s automation capabilities and FA’s broad vertical coverage creating opportunities for cost synergies and market share gains. While near-term volatility from integration expenses and deleveraging is expected, BMO forecasts meaningful earnings accretion by 2026, driven by synergy realization and a recovering labor market.

FA’s current valuation appears attractive relative to its historical trading range, particularly given its resilient performance amid macro pressures, the brokerage said.

BMO analysts said that FA’s combination of improving hiring dynamics, acquisition-driven synergies, and an undervalued stock price creates a compelling entry point for investors with a medium-term horizon.