Fair Isaac Corporation (FICO)

Conclusion

Fair Isaac Corporation provides analytics software and predictive credit scores through two segments, Scores and Software. At a price of 723.76 USD on 2026-11-09, its market capitalisation is 15.6 billion USD.

The verdict is undervalued. Today's price-to-earnings ratio of 18.7x compares with a ten-year median of 47.6x, and EV/EBITDA of 16.3x compares with a median of 34.3x. The discounted cash flow gives 729.63 USD per share at a discount rate of 11.6%, while the fair value band runs from 1004.56 to 1506.84 USD with a midpoint of 1255.70 USD, a margin of safety of 73.5%. The fair value from historical multiples is 1781.77 USD, a separate figure. The reverse DCF implies revenue growth of 8.95% a year, against a five-year revenue CAGR of 14.0% and a five-year free cash flow per share CAGR of 26.8%.

What holds the case up is a return on invested capital of 80.9% against a WACC of 10.0%, free cash flow conversion of 128.1% over the last twelve months, and a Piotroski score of 8 out of 8. What would break it is leverage, with net debt to EBITDA at 4.0x and a current ratio of 0.99, together with estimate revisions for next year, which have fallen 12.9% over 90 days with 10 downward revisions and none upward.

Financial health

Financial strength is yellow: no metric is assessed good or bad, and the two assessed neutral are net debt to EBITDA of 4.0x and a current ratio of 0.99, with a quick ratio of 0.89. Interest coverage is not available because the company does not report its interest expense. Debt to equity is not available because equity is negative, so the ratio has no meaning here. The Altman Z-score is not available because its inputs are missing; the model was designed for manufacturers, which this company is not. Insolvency risk: high, about 99.9% by the estimate of the Ohlson model over one to two years, with an O-score of 7.03. This estimate is driven largely by the negative equity and should be read with that in mind.

Earnings quality

Earnings quality is green. Free cash flow conversion is 128.1% over the last twelve months and 121.9% over five years, and the accrual ratio is -12.0%, which indicates that reported earnings are backed by cash. Stock-based compensation is 7.3% of revenue, and free cash flow after it is 884.5 million USD. The five-year share count CAGR is -4.7%, meaning the company has been reducing its share count through buybacks. The Piotroski score is 8 out of 8. The Beneish M-score is flagged in the data, but its reading is not available. The company beat earnings expectations in 7 of the last 8 quarters, with an average surprise of 5.4%. Estimate revisions are weak: the current-year estimate changed by -1.0% over 90 days, with 1 upward and 7 downward revisions in the last 30 days, and the next-year estimate changed by -12.9% over 90 days, with 10 downward revisions and none upward.

Profitability

Profitability is green. Gross margin is 86.1% against a ten-year median of 76.4%, operating margin is 49.9% against a median of 38.9%, and net margin is 32.9% against a median of 27.8%. The operating margin stability reading is 0.3443. Return on invested capital is 80.9% against a WACC of 10.0%, and the given spread between them is 70.95%. The five-year median ROIC is 50.3%. On the DuPont split, the net margin of 32.9% is combined with an asset turnover of 1.22x. Return on equity is not available because equity is negative, so the leverage contribution cannot be separated from the return.

Growth

Growth is green. Revenue grew at a compound rate of 18.8% over three years, 14.0% over five years and 11.1% over ten years, and it grew in all ten of the last ten years. Earnings per share compounded at 29.0% over three years, 22.1% over five years and 26.8% over ten years. Free cash flow per share compounded at 36.5% over three years, 26.8% over five years and 23.1% over ten years. Looking ahead, the next-year earnings estimate implies growth of 8.5%, which is lower than the historical rates above.

Valuation

Valuation is green. The price-to-earnings ratio of 18.7x is at a premium of -60.7% to its ten-year median of 47.6x, EV/EBITDA of 16.3x is at -52.3% against 34.3x, price to free cash flow of 14.6x is at -59.5% against 36.1x, and price to sales of 6.2x is at -28.7% against 8.6x. The DCF gives 729.63 USD per share at a discount rate of 11.6%, with the terminal value making up 47.9% of the result. The fair value band runs from 1004.56 to 1506.84 USD with a midpoint of 1255.70 USD, a margin of safety of 73.5% at the current price. The fair value from historical multiples is 1781.77 USD. The reverse DCF implies growth of 8.95%, against a five-year revenue CAGR of 14.0% and a five-year free cash flow per share CAGR of 26.8%. These fair values are estimates built on fixed assumptions, not price targets. The company pays no dividend, so the forward yield is 0.

Risks

The weakest numbers are net debt to EBITDA of 4.0x, which limits the company's room to absorb a fall in earnings, and the current ratio of 0.99, which means current liabilities roughly match current assets. Negative equity, the Ohlson estimate of 99.9%, and the next-year estimate cut of 12.9% would each deserve attention if the trend in estimates continues. Several values are not available: the Altman Z-score, interest coverage, debt to equity, return on equity and the Beneish reading. The cost of debt of 6.9% used in the discount rate is an assumption, not a reported figure. This analysis has no debt maturity schedule and no revenue breakdown by segment, so refinancing risk and the contribution of each segment cannot be assessed.