Fair Issac Surges 75% Year to Date: Should You Buy the Stock?

Fair Issac’s FICO shares have outperformed the Zacks Computer & Technology sector and Zacks IT Services industry peers Infosys INFY and ServiceNow NOW in the year-to-date period.

While FICO has surged 74.5%, Infosys has risen 24.7% and ServiceNow has gained 32.8%. The broader sector has appreciated 25.5% over the same timeframe.

The robust stock price performance can be attributed to the strong performance in its Scores and Software segments which led to significant growth in its clientele and driven top-line growth.

In the third quarter of fiscal 2024, revenues increased 12% year over year, with Software and Scores revenues increasing 5% and 20%, respectively.

Will Strong Demand for the FICO Platform Boost the Stock?

FICO is riding on the strong adoption of its FICO Scores, which remains a dominant player in the consumer credit scoring market.

The robust market position is further supported by the adoption of FICO Score 10-T for non-GSE mortgages in third-quarter fiscal 2024, covering more than $126 billion in annual originations and $380 billion in servicing. This is set to boost future revenues through enhanced credit decision-making and securitization.

FICO is also executing a successful land-and-expand strategy, which has driven consistent growth in Annual Recurring Revenue (ARR) from its FICO platform SaaS offerings. In the third quarter of fiscal 2024, platform ARR grew by an impressive 31%, contributing to overall ARR growth of 10%.

FICO’s expanding international footprint has been noteworthy, with 85% of revenues from the Americas, 10% from EMEA, and 5% from Asia-Pacific in the third quarter of fiscal 2024, reflecting growth opportunities beyond its stronghold in North and Latin America.

Fair Issac’s expanding clientele is noteworthy, highlighted by its partnership with Cognizant CTSH to launch a cloud-based real-time payment fraud prevention solution powered by FICO Falcon Fraud Manager. The collaboration is aimed at enhancing security measures and streamlining fraud detection for clients across various industries.

FICO and Cognizant’s joint offering leverages AI and machine learning to help banks and other payment service providers in North America protect their customers from fraud.

FICO Offers Strong 2024 Outlook

The robust portfolio and an expanding clientele bode well for FICO’s top-line growth trajectory in 2024. 

Fair Issac expects total revenues of $1.7 billion for this fiscal year. Non-GAAP earnings are expected to be $23.16 per share.

The Zacks Consensus Estimate for revenues is pegged at $1.72 billion, indicating year-over-year growth of 13.53%. 

The consensus mark for fiscal 2024 earnings is pegged at $23.79 per share, which increased 0.55% in the past 30 days and reflects 20.66% year-over-year growth.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

What Should Investors Do With FICO Stock?

FICO’s strong portfolio and growing clientele, particularly in its Scores and Software segments, are driving continuous top-line growth and enhancing its growth prospects.

Moreover, the stock currently carries a Zacks Rank #2 (Buy) and has a Growth Score of B. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Per Zacks’ proprietary methodology, stocks with a combination of Zacks Rank #1 or 2 and a Growth Score of A or B offer solid investment opportunities.

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Cognizant Technology Solutions Corporation (CTSH): Free Stock Analysis Report
 
American Noble Gas Inc. (INFY): Free Stock Analysis Report
 
Fair Isaac Corporation (FICO): Free Stock Analysis Report
 
ServiceNow, Inc. (NOW): Free Stock Analysis Report

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