Fair Isaac Corp (FICO): what the price requires

At today's price, Fair Isaac Corp (FICO) is priced for +25.3% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/FICO

Headline

FieldValue
TickerFICO
CompanyFair Isaac Corp
Current price$1276.65/sh
CompositionScores 59% / On-premises and SaaS software 37% / Professional services 4%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin needed15.6%
Operating margin today51.1%
Margin compression implied-35.5pp
Implied growth25.3%
Multiple paid29x operating income

The operating-margin requirement is derived from the framework's value band at year 11, a separately labeled basis from the headline growth/duration solve.

Solve inputs: computed at a 9.3% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~6.2pp.

How unusual the bet is: high

ReferenceValue
vs own history+0.89σ
cohort percentile (of 210 peers)80
sustained it ~5 years at this level30%
implied end-window share0%

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset—0—
Earnings4.81x5expensive
Relative1.46x5expensive
Growth0.78x3justifies

Families that justify the price: Growth Families that call it expensive: Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.3%); the inversion above states its own rate.

Per-Model Detail (n=13)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$1636.600.78xyesFCF base $1.0B, growth 22% (input: historical growth), terminal g 4.0%, WACC 8.4%, 7yr projection
DCF Exit MultipleGrowth$1660.280.77xyesExit EV/EBITDA: 27.3x / 29.3x / 31.3x (bear / base = today's held flat / bull), 7yr
Relative ValuationRelative$876.791.46xyesP/E 25.97x (blended: static sector reference 20x + trailing (TTM) 40x), scenarios: 21.0x / 26.0x / 31.0x (bear / base = reference held flat / bull), EV/EBITDA 18.59x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset——no—
Two-Stage Excess ReturnAsset——no—
Discounted Future Market CapGrowth$1355.260.94xyesRev $2.3B, growth 22% (input: historical growth; tapered), Terminal P/S: 9.7x / 12.0x / 14.3x (bear / base = today's held flat / bull, cap 12x)
Peter Lynch Fair ValueRelative$1104.601.16xyesEPS $31.56, growth 35% (input: historical EPS growth), PEG=1.14 (Fair)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$139.729.14xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.76B × (1−26%) / WACC 8.4% → EPV (no growth)
Residual IncomeAsset——no—
Graham NumberAsset——no—
EV/EBITDA RelativeRelative$534.242.39xyesEBITDA $1.15B × sector EV/EBITDA 14.0x
FCF YieldEarnings$265.374.81xyesFCF $900.9M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$190.756.69xyesSBC-adj FCF $0.74B (FCF $0.90B − SBC $0.16B) capitalized at Kₑ
Ben Graham FormulaEarnings$1018.341.25xyesEPS $31.56 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset——no—
P/Sales SectorRelative$142.488.96xyesRevenue $2.26B × sector P/S 1.5x
PEG Fair ValueRelative$1183.501.08xyesEPS $31.56 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings YieldEarnings$341.193.74xyesEPS $31.56 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$3.4b
Net debt / NOPAT (after-tax)4.05x
Net debt / operating income (pre-tax)3.01x
Interest coverage7.6x
Share count CAGR (buyback)-2.6%
Burning cashno

Bullet Takeaways

The decisive number is B2B Scores revenue, which jumped 72% in the latest quarter on higher mortgage scoring price and volume, lifting total Scores revenue 60% to $475 million. That single line drives the company, and it is also the line now under attack.

The stock has already absorbed the threat: shares are down roughly half from a $2,206 high to around $1,096 after Fannie Mae and Freddie Mac began accepting VantageScore as a mortgage alternative in April 2026, ending FICO's near-monopoly.

At the lower price, only the growth-DCF reaches the level, near $1,485 to $1,693, while no-growth earnings methods sit far below. The price is a bet that pricing power survives competition, and that bet is now contested rather than assumed.

Bull Case

One metric decides this company, and it has been spectacular: business-to-business Scores revenue. In the latest quarter B2B scoring grew 72% on higher mortgage origination pricing and volume, pushing total Scores revenue up 60% to $475 million and total revenue up 39% to $692 million. Non-GAAP EPS reached $12.50 against an $11.03 estimate, and free cash flow more than tripled to $214 million. This is a business where a single product, the FICO Score embedded in nearly every U.S. mortgage decision, throws off enormous, high-margin cash on almost no incremental cost. The 10-K describes lenders integrating predictive scores directly into their transaction and decision streams (accession 0000814547-25-000030), which is the definition of a product too embedded to easily replace.

The durability of that embedding is why the static models fail here. FICO carries negative book value because years of buybacks have returned more than its accounting equity, so asset-based methods cannot value it at all and the earnings-power method, which assumes no growth, lands at $144. Neither captures a 50%-operating-margin franchise compounding revenue north of 20%. The growth-DCF, the only method built for it, reaches $1,485 to $1,693, well above the current price, and the future-market-cap method lands at $1,303.

The paradox is that the competitive scare has made the metric cheaper relative to its own trajectory. The stock has fallen roughly half from its 2025 high even as Q2 set records and management raised full-year guidance to $2.45 billion in revenue and $40.45 in non-GAAP EPS. For a buyer who believes the FICO Score remains the lender standard and that price increases already taken will stick, the company is now compounding 20%-plus while priced below where the growth methods say it belongs. The decisive metric is still growing; the market has simply stopped paying a monopoly multiple for it.

Bear Case

The truth a holder has to face is the one the bull case keeps circling: the monopoly that justified the multiple has been cracked, and the cheap competitor is the whole story. On April 23, 2026, Fannie Mae and Freddie Mac began accepting VantageScore as an alternative to the FICO Score for mortgage underwriting, ending a near-monopoly that had stood for decades. VantageScore 4.0 is being offered at close to a 90% discount to FICO's bundled rates, and the regulatory push, including the FHFA leadership's stated aim to cut credit-score costs, points the same direction. FICO's own 10-K had already flagged the risk of a change permitting mortgage originators to underwrite with scores from fewer than three agencies and the resulting threat to its ability to compete in the mortgage market (accession 0000814547-25-000030). The risk is no longer hypothetical; it is live.

The valuation has no support beneath the growth case. Strip out the growth-DCF and the picture is stark: the earnings-power method lands at $144, the FCF-yield method at $265, the SBC-adjusted FCF method at $191, and the P/S method at $142, all a fraction of the price near $1,096. The stock trades at four to seven times what its current cash generation supports without growth, on the premise that 20%-plus compounding continues. That premise rested almost entirely on mortgage-score pricing power, which is precisely what VantageScore and the GSEs are now attacking. The negative book value, a product of aggressive buybacks, means there is no asset floor to catch a falling multiple.

The recent strength is also a trap for the unwary, because it is backward-looking. The 72% B2B surge came from price increases FICO had already pushed through before the competitive door opened, so the record quarter reflects the old pricing regime, not the new one. UBS lowered its target to $1,350 while staying Neutral on exactly these competitive and valuation concerns. The half-off price is not obviously a bargain; it is the market beginning to re-rate a franchise whose central pricing lever is being pried loose. If lenders adopt the cheaper score even at the margin, the decisive metric that drove everything reverses, and there is a long way down to where the no-growth methods sit.

Valuation

Inverting the price shows the bet plainly. At about $1,096 the market pays roughly 25x company-wide operating income, which solves to about 21% annual operating-profit growth over a five-year stage at a 9.3% cost of capital with 4% terminal growth. For a company that has grown faster than that, the rate sounds achievable; the question the inversion cannot answer is whether the pricing power behind that growth survives the new competition. The rate-robustness flag is off, so a higher discount rate would pressure the math further.

The model X-ray is extreme. Only the growth family reaches the price, with the perpetual-growth DCF at $1,693 and the exit-multiple DCF at $1,485, and the future-market-cap method close behind at $1,303. The relative family is mixed, with the blended-P/E method at $817 and the EV/EBITDA comp at $534. The earnings family is far below: earnings-power value at $144, FCF-yield at $265, and earnings-yield at $341. Asset methods do not apply because book value is negative.

The resulting band runs from about $646 at the low end to $1,000 at the base and $1,234 at the high, with reliability tagged as ok, and today's price sits between the base and the high. That is the honest summary: on growth methods the stock looks reasonable after its decline, and on no-growth cash methods it remains expensive. The deciding variable is the FICO Score's pricing power in mortgage, and that variable has shifted from a near-certainty to an open contest.

Catalysts

The dominant catalyst already fired. On April 23, 2026, Fannie Mae and Freddie Mac began accepting VantageScore as a mortgage-underwriting alternative to the FICO Score, ending a long-standing near-monopoly, and the shares have fallen roughly half from a $2,206 high in May 2025 to around $1,096. The pace at which lenders actually adopt the cheaper VantageScore, offered at close to a 90% discount, is now the single most important thing to watch, because it determines whether FICO's mortgage pricing power erodes slowly or quickly.

The most recent earnings, by contrast, were a blowout, which is what makes the setup tense. Q2 fiscal 2026 brought revenue of $692 million, up 39%, with Scores revenue up 60% to $475 million on a 72% B2B surge, non-GAAP EPS of $12.50 against an $11.03 estimate, and free cash flow of $214 million. Management raised full-year guidance to $2.45 billion in revenue, GAAP EPS of $35.60, and non-GAAP EPS of $40.45. The next print is the first real test of whether the new competition shows up in the numbers.

The regulatory and political thread is ongoing. The FHFA leadership has signaled an intent to reduce credit-score costs, so any further policy move or GSE guidance is a live catalyst. Sentiment has turned cautious, with UBS at Neutral and a lowered $1,350 target citing competitive and valuation risk, and the broad debate now is whether the 50% drop has priced the threat or only begun to.

Sources: stocktitan.net (Q2 FY26 results), investing.com (Q2 FY26 mortgage-score surge), bloomberg.com (Pulte credit-score cost move), tradingview.com (post-drop valuation debate).

Peer Cohorts (Per Segment, With Filing Citations)

Scores (reported)

Software (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

View the full interactive FICO report on boothcheck