Fair Isaac Stock Down 9.8% in One Day, Wait For A Dip To Buy The Stock

We believe there is not much to fear in FICO stock given its overall Strong operating performance and financial condition. But given its Very High valuation, the stock appears Relatively Expensive. Here is our multi-factor assessment.

That is one way to look at stocks. Trefis High Quality Portfolio evaluates much more, and is designed to reduce stock-specific risk while giving upside exposure.

Let’s get into details of each of the assessed factors but before that, for quick background: With $41 Bil in market cap, Fair Isaac provides analytic, software, and data management solutions that automate and enhance business decisions through scoring and integrated analytics services.

[1] Valuation Looks Very High

This table highlights how FICO is valued vs broader market. For more details see: FICO Valuation Ratios

[2] Growth Is Strong

• Fair Isaac has seen its top line grow at an average rate of 10.9% over the last 3 years
• Its revenues have grown 15% from $1.6 Bil to $1.8 Bil in the last 12 months
• Also, its quarterly revenues grew 15.0% to $499 Mil in the most recent quarter from $434 Mil a year ago.

This table highlights how FICO is growing vs broader market. For more details see: FICO Revenue Comparison

[3] Profitability Appears Very Strong

• FICO last 12 month operating income was $813 Mil representing operating margin of 44.2%
• With cash flow margin of 38.5%, it generated nearly $709 Mil in operating cash flow over this period
• For the same period, FICO generated nearly $577 Mil in net income, suggesting net margin of about 31.4%

This table highlights how FICO profitability vs broader market. For more details see: FICO Operating Income Comparison

[4] Financial Stability Looks Strong

• FICO Debt was $2.5 Bil at the end of the most recent quarter, while its current Market Cap is $41 Bil. This implies Debt-to-Equity Ratio of 6.2%
• FICO Cash (including cash equivalents) makes up $147 Mil of $1.8 Bil in total Assets. This yields a Cash-to-Assets Ratio of 8.0%

[4] Downturn Resilience Is Moderate

FICO saw an impact slightly better than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• FICO stock fell 38.2% from a high of $552.88 on 23 July 2021 to $341.44 on 9 May 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 10 November 2022
• Since then, the stock increased to a high of $2,382.40 on 26 November 2024 , and currently trades at $1,695.01

2020 Covid Pandemic

• FICO stock fell 50.9% from a high of $431.78 on 19 February 2020 to $212.00 on 18 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 29 July 2020

2008 Global Financial Crisis

• FICO stock fell 76.2% from a high of $41.67 on 19 January 2007 to $9.90 on 5 March 2009 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 9 March 2012

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read FICO Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – S&P 500, Russell, and S&P midcap. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.