What Happened?
Shares of background screening provider First Advantage (NASDAQ: FA) jumped 8.5% in the morning session after S&P Dow Jones Indices announced the company will be added to the S&P SmallCap 600 index.
The inclusion would be effective prior to the market opening on Tuesday, June 16, with First Advantage set to replace Kennedy-Wilson Holdings Inc.
When a company is added to a major index like the S&P SmallCap 600, it typically leads to a stock price increase. This is because investment funds that track the index, such as index funds and exchange-traded funds (ETFs), are required to buy the stock to ensure their portfolios match the index's new composition. This forced buying creates increased demand and visibility for the shares.
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What Is The Market Telling Us
First Advantage’s shares are very volatile and have had 24 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 4 months ago when the stock gained 18.8% on the news that the company reported strong fourth-quarter 2025 results that beat analyst expectations on both revenue and profit and issued an optimistic full-year outlook. The background screening provider posted revenue of $420 million, a 36.8% increase from the same period in the previous year and well ahead of Wall Street's forecasts. Adjusted earnings per share came in at $0.30, also surpassing expectations. Looking ahead, the company's full-year revenue guidance of $1.66 billion at the midpoint was higher than analysts had estimated, while its adjusted earnings forecast of $1.20 per share was also above consensus.
First Advantage is up 17.4% since the beginning of the year, and at $16.73 per share, it is trading close to its 52-week high of $18.40 from July 2025. Investors who bought $1,000 worth of First Advantage’s shares at the IPO in June 2021 would now be looking at an investment worth $849.24.
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