Fair Isaac (FICO) Could Be 22% Undervalued Following New Platform And Marketplace Deals
Fair Isaac (FICO) is back in focus after FICO Score 10T was integrated into Optimal Blue’s capital markets platform and Verdata’s risk data became available through FICO Marketplace.
See our latest analysis for Fair Isaac.
These product announcements come after a strong run in recent months, with Fair Isaac’s 90 day share price return of 12.70% contrasting with a year to date decline of 26.62%. The 5 year total shareholder return of 122.95% points to solid longer term compounding.
If these developments have you thinking about where else growth and risk are being repriced, it could be a good time to scan for other 63 profitable AI stocks that aren't just burning cash
After Fair Isaac’s sharp rebound and a share price around $1,205.79 that still sits well below average analyst and intrinsic estimates, the gap is hard to ignore. How close is the current price to fair value now?
Most Popular Narrative: 22.3% Undervalued
Against Fair Isaac's last close at $1,205.79, the most followed narrative points to a fair value of about $1,552.52, implying a sizeable valuation gap that hinges on earnings power and cash flow strength.
The ongoing transition to SaaS and cloud-based delivery, evidenced by double-digit growth in FICO Platform ARR and emphasis on conversion to next-generation AI-driven decisioning solutions, is increasing recurring revenues, supporting margin expansion and greater earnings predictability. Sustained investment in explainable AI and machine learning, as showcased by new FICO-focused foundation models and decisioning innovations, is enhancing competitive differentiation and supporting premium product offerings, increasing average selling prices and net margins.
Curious what sits behind that valuation gap, and how much of it rests on faster revenue expansion, rising margins and a rich future earnings multiple that still tops the wider software sector?
The narrative applies a discount rate of 8.82% and ties its fair value to expectations around revenue growth, profit margins and future valuation multiples, which investors can compare against their own assumptions before deciding how closely to lean on that $1,552.52 figure.
Result: Fair Value of $1,552.52 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, there are clear pressure points investors in Fair Isaac need to watch, including mortgage scoring competition from VantageScore and signs of slower software platform growth.
Find out about the key risks to this Fair Isaac narrative.
Another View: Fair Isaac Looks Expensive On Earnings
While Fair Isaac screens as about 23.2% below one fair value estimate from our DCF model at $1,570.73, its current P/E of 36.8x sits above both the US Software industry at 28.8x and peer average at 26.3x, and even above a fair ratio of 33.2x. Is the premium a cushion or a risk if sentiment shifts?
To see how this earnings based view is built and what would need to change for that premium to narrow, See what the numbers say about this price — find out in our valuation breakdown.
Next Steps
Does the mixed mood around Fair Isaac leave you unsure which side you lean toward? Take a closer look at the underlying data and weigh the 3 key rewards and 1 important warning sign
Looking for more investment ideas beyond Fair Isaac?
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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