What a brutal six months it’s been for Fair Isaac Corporation. The stock has dropped 44.3% and now trades at a new 52-week low of $591.41, rattling many shareholders. This was partly due to its softer quarterly results and might have investors contemplating their next move.
Following the drawdown, is now an opportune time to buy FICO? Find out in our full research report, it’s free.
Why Is Fair Isaac Corporation a Good Business?
Creator of the three-digit number that can determine whether you get a mortgage or credit card, Fair Isaac Corporation (NYSE: FICO) develops analytics software and the widely used FICO Score, which is the standard measure of consumer credit risk in the United States.
1. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Fair Isaac Corporation’s EPS grew at 26.2% compounded annual growth rate over the last five years, higher than its 12% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
2. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
Free cash flow isn’t a prominently featured metric in company financials and earnings releases, but we think it’s telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Fair Isaac Corporation has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the business services sector, averaging an eye-popping 35.8% over the last five years.
3. New Investments Bear Fruit as ROIC Jumps
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Fortunately, Fair Isaac Corporation’s ROIC has increased significantly over the last few years. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.
Final Judgment
These are just a few reasons why we think Fair Isaac Corporation is an elite business services company. After the recent drawdown, the stock trades at 12.4× forward P/E (or $591.41 per share). Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
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