Fair Isaac (FICO) AI Stock Analysis

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Fair Isaac

(NYSE:FICO)

63Neutral

FICO's overall score reflects strong financial performance and positive earnings call insights, offset by significant leverage and high valuation risks. The stock's technical indicators suggest consolidation, but the premium valuation could limit upside potential.

Positive Factors

Financial Performance

FICO closed out FY24 on a high note, reporting estimates that comfortably beat Street consensus on the top and bottom line due to ongoing strength in the Scores business and impressive margin leverage.

Growth Outlook

FICO remains confident in Platform ARR reaccelerating to 30% growth in the second half of FY25.

Revenue Growth

FICO has leveraged its market position to take significant price increases in its Scores business, accelerating revenue growth.

Negative Factors

Earnings Miss

FICO's 1Q results missed Street expectations, a rare event for the company.

Regulatory Risk

U.S. policymakers have criticized FICO’s price increases, and forthcoming regulatory changes could create a competitive opportunity for a challenger scoring system.

Valuation Concerns

FICO stock carries an expensive valuation that embeds high growth expectations despite meaningful execution risk.

Fair Isaac (FICO) vs. S&P 500 (SPY)

Market Cap

$41.83B

Dividend YieldN/A

Average Volume (3M)193.07K

Price to Earnings (P/E)77.0

Beta (1Y)1.22

Revenue Growth14.49%

EPS Growth21.85%

CountryUS

Employees3,604

SectorTechnology

Sector Strength40

IndustrySoftware - Application

Share Statistics

EPS (TTM)21.79

Shares Outstanding24,418,139

10 Day Avg. Volume172,232

30 Day Avg. Volume193,071

Financial Highlights & Ratios

PEG Ratio3.52

Price to Book (P/B)N/A

Price to Sales (P/S)25.49

Price to Cash Flow (P/CF)58.30

P/FCF Ratio52.30

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$2,157.10

Price Target Upside28.62% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering10

Fair Isaac Business Overview & Revenue Model

Company DescriptionFair Isaac Corporation develops analytic, software, and data management products and services that enable businesses to automate, enhance, and connect decisions in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. It operates through two segments, Scores and Software. The Software segment offers pre-configured decision management solution designed for various business problems or processes, such as marketing, account origination, customer management, customer engagement, fraud detection, financial crimes compliance, collection, and marketing, as well as associated professional services. This segment also provides FICO Platform, a modular software offering designed to support advanced analytic and decision use cases, as well as stand-alone analytic and decisioning software that can be configured by customers to address a wide range of business use cases. The Scores segment provides business-to-business scoring solutions and services for consumers that give clients access to analytics to be integrated into their transaction streams and decision-making processes, as well as business-to-consumer scoring solutions comprising myFICO.com subscription offerings. Fair Isaac Corporation markets its products and services primarily through its direct sales organization and indirect channels, as well as online. The company was formerly known as Fair Isaac & Company, Inc. and changed its name to Fair Isaac Corporation in July 1992. Fair Isaac Corporation was founded in 1956 and is headquartered in Bozeman, Montana.

How the Company Makes MoneyFICO generates revenue through a combination of software sales, professional services, and credit scoring services. A significant portion of its income comes from licensing its analytics software and tools to financial institutions, which use these products for decision management and risk assessment. FICO also earns revenue from consulting services, helping businesses implement and optimize its technology solutions. Additionally, the company receives revenue from its credit scoring services, which are used by lenders and consumers alike to evaluate creditworthiness. FICO's strategic partnerships with banks, credit card companies, and other financial institutions further bolster its earnings by facilitating widespread adoption of its scoring models and analytics services.

Fair Isaac Financial Statement Overview

Summary

Fair Isaac shows strong profitability and cash flow generation. However, the company faces significant risks due to its high leverage and negative equity position. Despite stable revenue and profit margins, financial stability is a concern.

Income Statement

Very Positive

Fair Isaac demonstrates strong profitability metrics with a Gross Profit Margin of 80.1% and a Net Profit Margin of 30.7% for TTM, indicating high efficiency in converting revenue to profit. The company's Revenue Growth Rate is 3.4%, showing moderate growth. Both EBIT and EBITDA Margins are robust at 42.9% and 44.1%, respectively, reflecting effective cost management and operational efficiency.

Balance Sheet

Negative

The balance sheet presents a challenging picture with a negative Stockholders' Equity of $1.14 billion, resulting in a negative Equity Ratio and a high Debt-to-Equity Ratio, which indicates significant financial leverage. This high level of debt compared to equity could pose a risk in economic downturns. Return on Equity is not applicable due to negative equity.

Cash Flow

Positive

The cash flow statement shows strong cash generation with a Free Cash Flow of $679.8 million, indicating solid liquidity. The Operating Cash Flow to Net Income Ratio is 1.3, signifying efficient cash conversion from earnings. The Free Cash Flow Growth Rate is 8.9%, pointing to positive momentum in cash generation.

TTM	Sep 2024	Sep 2023	Sep 2022	Sep 2021	Sep 2020
Breakdown
Income Statement		Total Revenue
1.78B	1.72B	1.51B	1.38B	1.32B	1.29B
	Gross Profit
1.42B	1.37B	1.20B	1.08B	984.07M	933.42M
	EBIT
761.80M	733.63M	642.83M	542.41M	321.13M	295.97M
	EBITDA
783.44M	761.49M	663.81M	576.66M	554.93M	349.56M
	Net Income Common Stockholders
544.27M	512.81M	429.38M	373.54M	392.08M	236.41M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
342.52M	150.67M	136.78M	133.20M	195.35M	157.39M
	Total Assets
1.28B	1.72B	1.58B	1.44B	1.57B	1.61B
	Total Debt
570.00M	2.24B	1.89B	1.89B	1.31B	907.64M
	Net Debt
379.09M	2.09B	1.75B	1.76B	1.12B	750.25M
	Total Liabilities
706.93M	2.68B	2.26B	2.24B	1.68B	1.28B
	Stockholders Equity
570.45M	-962.68M	-687.99M	-801.95M	-110.94M	331.08M
Cash Flow		Free Cash Flow
679.81M	624.08M	464.68M	503.42M	416.25M	342.93M
	Operating Cash Flow
704.84M	632.96M	468.92M	509.45M	423.82M	364.92M
	Investing Cash Flow
-34.52M	-27.99M	-15.95M	-5.67M	137.85M	-24.58M
	Financing Cash Flow
-637.27M	-592.92M	-455.00M	-547.16M	-523.57M	-289.42M

Fair Isaac Technical Analysis

Technical Analysis Sentiment

Negative

Last Price1677.11

Price Trends

50DMA

1818.81

Negative

100DMA

1975.82

Negative

200DMA

1883.55

Negative

Market Momentum

MACD

10.10

Negative

RSI

52.85

Neutral

STOCH

44.53

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For FICO, the sentiment is Negative. The current price of 1677.11 is below the 20-day moving average (MA) of 1822.07, below the 50-day MA of 1818.81, and below the 200-day MA of 1883.55, indicating a bearish trend. The MACD of 10.10 indicates Negative momentum. The RSI at 52.85 is Neutral, neither overbought nor oversold. The STOCH value of 44.53 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for FICO.

Fair Isaac Risk Analysis

Fair Isaac disclosed 30 risk factors in its most recent earnings report. Fair Isaac reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Fair Isaac Peers Comparison

Overall Rating

UnderperformOutperform

Sector (57)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
TYL	73 Outperform	$23.06B	86.31	8.32%	―	9.53%	56.32%
CTSH	72 Outperform	$34.00B	15.25	16.21%	1.80%	1.98%	7.16%
FICO	63 Neutral	$41.83B	76.97	-47.82%	―	14.49%	21.85%
SNOW	63 Neutral	$43.78B	―	-31.43%	―	29.21%	-51.47%
Sector *	57 Neutral	$18.45B	9.41	-13.97%	2.74%	5.04%	-23.56%
NET	55 Neutral	$33.94B	―	-8.71%	―	28.76%	58.13%
FIS	51 Neutral	$37.03B	49.29	4.65%	2.15%	-17.38%	―

* Technology Sector Average

Performance Comparison

FICO

Fair Isaac

1,677.11

495.88

41.98%

CTSH

Cognizant

66.47

-2.42

-3.51%

FIS

Fidelity National Info

68.14

-3.13

-4.39%

TYL

Tyler Technologies

521.68

109.83

26.67%

NET

Cloudflare

97.45

2.62

2.76%

SNOW

Snowflake

133.51

-19.46

-12.72%

Fair Isaac Earnings Call Summary

Earnings Call Date: Feb 4, 2025 | % Change Since: -7.33% | Next Earnings Date: Apr 30, 2025

Earnings Call Sentiment Neutral

The earnings call presented a strong financial performance with notable revenue growth in both the Scores and Software segments, alongside successful capital returns to shareholders. However, challenges like foreign exchange impact, lower platform usage, and policy uncertainty offset some of the positive momentum.

Highlights

Strong Revenue Growth

FICO reported first quarter revenues of $440 million, up 15% over last year. GAAP net income increased by 26%, and GAAP earnings per share rose by 28% from the prior year. Non-GAAP earnings per share were up 20%.

Scores Segment Performance

The Scores segment reported first quarter revenues of $236 million, up 23% versus the prior year. B2B revenues were up 30%, driven by mortgage originations which increased by 110%.

Free Cash Flow and Share Buybacks

Free cash flow was $187 million for the quarter, a 55% increase from the same quarter last year. FICO repurchased 79,000 shares in Q1 and an additional 47,000 shares in January.

Recognition for Innovation

FICO's Customer Communication Service Scam Signal Solution won the Best Anti-Fraud Solution award. FICO also received the Tech of the Future Blockchain and Tokenization Award.

Software Segment Growth

Software segment revenues were $204 million, up 8% from last year, with growth driven mainly by SaaS software and license revenue.

Lowlights

Challenges in Software Segment

The software segment was hindered by the foreign exchange rate impact. Professional services revenue declined by 14%.

B2C Revenue Growth Sluggish

B2C revenues for the Scores segment were up only 3% versus the prior year, indicating slower growth compared to the B2B side.

Government Policy Uncertainty

The Federal Housing Finance Agency (FHFA) indefinitely delayed the implementation of bi-merge and a two-score system, adding uncertainty to FICO's plans.

Lower Platform Usage

Platform usage in the software segment was lower than expected, impacting the net retention rate.

Company Guidance

During the First Quarter 2025 FICO Earnings Conference Call, the company reiterated its fiscal 2025 guidance, reporting strong financial performance with first-quarter revenues of $440 million, a 15% increase from the previous year. The GAAP net income for the quarter was $153 million, up 26%, and GAAP earnings per share were $6.14, up 28% year-over-year. In terms of non-GAAP metrics, net income was $144 million, a 19% increase, and earnings per share were $5.79, a 20% rise from the prior year. The Scores segment reported revenues of $236 million, a 23% increase, with B2B revenues up 30%, driven by a 110% rise in mortgage originations revenues. The Software segment recorded $204 million in revenue, marking an 8% increase, primarily due to growth in SaaS software and license revenue. The company also highlighted a 36% increase in free cash flow over the last four quarters, totaling $673 million, and continued capital return to shareholders, including the repurchase of 79,000 shares in the first quarter.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.