Fair Isaac Corp (FICO): what the price assumes

In the published model solve dated 2026-Q2, anchored at $1153.57, Fair Isaac Corp (FICO) is priced for +16.1% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-26.

Generated: 2026-08-30 · Exported: 2026-08-31 · Source: https://boothcheck.com/report/FICO

Headline

What The Price Assumes (Inversion)

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

The operating-margin figure is value-band context at year 11: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 8.6% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

The price is justified by relative-multiple and growth-DCF; earnings-power land below the price.

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.

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

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.6%); the inversion above states its own rate.

Per-Model Detail (n=10)

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Bullet Takeaways

• The Scores business converts ninety cents of every revenue dollar into operating profit, because producing one more credit score costs almost nothing and the price is set by a supplier for which lenders have no ready substitute.
• Both engines behind the recent surge are borrowed rather than built: the company attributes the gain to a higher unit price and an increase in volume of mortgage originations, one a pricing decision that attracts regulatory attention, the other a rate cycle nobody controls.
• Fiscal third-quarter results are due July 29, 2026, and they cover the quarter in which the company borrowed 1.5 billion dollars and handed the whole amount to a share buyback.

Bull Case

Most valuation methods were built for companies that turn inputs into outputs, and they ask what the outputs are worth. The largest part of Fair Isaac barely has inputs. In the March quarter its Scores segment converted ninety cents of every revenue dollar into operating profit, and the filing is precise about the cause: Scores segment operating income as a percentage of segment revenue increased to 90% from 88%, primarily due to higher business-to-business scores revenue driven by a higher unit price and an increase in volume of mortgage originations. When the next unit costs essentially nothing to make, a price increase is not mostly profit. It is all profit. That is a thing no earnings-power model knows how to hold.

The arithmetic at the company level follows from it. Operating income was $402.5 million during the quarter ended March 31, 2026, a 64% increase from the quarter ended March 31, 2025, and $636.5 million during the six months ended March 31, 2026, a 50% increase over the comparable period. Trailing operating margin for the whole business runs near 51%, and very few companies of any size operate up there for long, let alone while accelerating.

The other half of the business compounds by a different mechanism, and it is quieter. Annual recurring revenue in the Software segment reached 788.8 million dollars at March 31, 2026, up 10% from a year earlier, with dollar-based net retention of 109%. Retention above par means existing customers spend more each year without anyone selling them anything new. It is the least glamorous line in the report and the one that requires the least to go right.

Standing behind both is a distribution position that took decades to build. The company describes its score as used by 90% of top U.S. lenders, and the shape of the debate around it is telling. At TRU, one of the bureaus that resells the score, the disclosed regulatory concern is that the Federal Housing Finance Agency and various government sponsored entities continue to evaluate permitting mortgage originators to underwrite loans using less than the customary set of credit reports. The argument in the market is over how many bureau files a lender must pull, not over which score sits on them.

Management's own capital allocation says what it thinks of all this. In June the company amended its credit agreement for an incremental term loan of 1.5 billion dollars maturing May 15, 2028, drew the entire amount, and pointed all of it at an accelerated share repurchase, taking initial delivery of roughly 1,055,100 shares under a new authorization of up to 2.0 billion dollars. The share count had already been falling about 2.6% a year since early 2022. Borrowing in order to own less of your own equity is a statement about how durable you believe the cash flow to be. It is also, as the bear will point out, a statement that can be wrong.

Bear Case

Ask where the last year of growth actually came from and the company answers without being asked: a higher unit price and an increase in volume of mortgage originations. Those are the two engines. The first is a decision, and a decision can only be repeated so many times before the people paying start looking for alternatives. The second is the mortgage cycle, which nobody decides. At EFX, one of the bureaus through which those scores are sold, the exposure is stated in one line: Any change in the U.S. mortgage market has a corresponding impact on revenue and operating profit for our business within the Workforce Solutions and USIS operating segments. The rate path that lifted origination volume this year is fully capable of taking it back, and the price paid for a score does not rise when fewer loans are written.

The valuation leaves no room for that. The market is paying about 28 times company-wide operating income, and that multiple embeds operating profit compounding at roughly 24.5% a year for five years. The multiple sits at the very top of its peer distribution, beyond the upper quartile. Across the company's own long record the average pace has been closer to 12.6%, and among comparable fast growers only about 31% sustained the required rate for even five years. The requirement is not impossible. It is unusual, and the price treats it as the base case.

Then there is who stands between the product and the customer. Scores reach mortgage lenders through three national consumer reporting agencies, and the company flags the arrangement as a constraint on itself: The ability of our FICO Score to compete effectively in the U.S. mortgage market may be constrained by the pricing and other business practices of the consumer reporting agencies. A segment margin of ninety cents on the dollar is a standing invitation for the parties in the middle to keep more of the spread and for the lenders at the end to fund an alternative.

The regulatory thread runs to the same place. The 10-K states that If use of the FICO Score by Fannie Mae and Freddie Mac were to cease or decline, it could have a material adverse effect on our revenues, and separately that risk arises If other credit score models are approved for use with mortgages delivered to Fannie Mae and Freddie Mac, or the FICO Score is not approved for continued use with those mortgages. The same framework is weighing a future change permitting mortgage originators to underwrite loans using credit scores from fewer than three national consumer reporting agencies. Fewer files pulled means fewer scores sold, on every loan, permanently.

The balance sheet has stopped being a cushion and started being part of the position. Net debt was about 3.4 billion dollars at the end of March, roughly 3 times operating profit, against liquid assets of about 219 million dollars, with operating profit covering interest around 7.6 times over. In June the company added another 1.5 billion dollars of term borrowing purely to retire stock, with principal repayments of 75 million dollars a quarter starting September 30, 2026 and stepping up to 112.5 million after mid-2027. Grant the bull the point that the recurring software base and the score franchise are genuinely durable. The question the bear asks is narrower: buying equity back at this multiple with borrowed money is a wager on the multiple holding, and the multiple is the thing least under management's control.

Valuation

What the price assumes here is unusually legible. The market is paying about 28 times the company's operating income, and read backwards that multiple embeds operating profit compounding near 24.5% a year for five years. The company has recently grown that fast, so the demand is not fantastical. The demand is duration. Among comparable fast growers, only about 31% held that pace for even five years, and the multiple itself sits at the very top of the peer distribution, beyond the upper quartile.

The methods do not disagree politely. Only the cash-flow methods reach the price at all. The earnings-power approaches capitalize today's profit and credit no expansion whatever, and they sit furthest away: the premium above the earnings-power reads is roughly 366%. The peer-multiple approaches carry a premium of about 43%. Nothing static gets close.

That pattern is not a verdict in either direction. It says the whole of what is being paid for is persistence: how long the ninety percent Scores margin and the recurring software base keep compounding before they slow. Methods that assume no growth cannot price persistence, by construction, which is exactly why they land where they do. What is worth noting is that the market is not applying this treatment to the sector, only to this company, since the multiple sits above every peer in the comparison set.

The composition underneath the blended figure matters, because a single company-wide margin averages very different businesses. Trailing operating margin for the whole is near 51%, while the Scores segment on its own runs at 90% of segment revenue. Scores account for 59% of the top line and on-premises and SaaS software for 37%, with professional services making up the rest. The blended figure is being carried by the half that costs almost nothing to run.

Solvency is where the position has changed most recently. Net debt of about 3.4 billion dollars at the end of March amounted to roughly 3 times operating profit, with liquid assets of about 219 million dollars and interest covered around 7.6 times by operating profit. Then in June the company drew an incremental term loan of 1.5 billion dollars, maturing May 15, 2028, and applied all of it to an accelerated share repurchase. The leverage in this story is no longer only in the multiple.

Catalysts

Fiscal third-quarter results are scheduled for July 29, 2026 after the close, with the date set by the company on July 15, 2026. The March quarter set the bar high: Operating income was $402.5 million during the quarter ended March 31, 2026, a 64% increase from the quarter ended March 31, 2025, with Scores segment operating income at 90% of segment revenue and software annual recurring revenue of 788.8 million dollars, up 10% year over year. The line that decides the quarter is mortgage origination volume, which the company names as one of the two drivers of the Scores gain.

The capital structure moved twice this year. On March 11, 2026 the company priced a private offering of 1.0 billion dollars of senior notes due 2034. On June 5, 2026 it amended its credit agreement to add an unsecured incremental term loan of 1.5 billion dollars maturing May 15, 2028 and drew the full amount the same day; three days later it announced a new open-ended repurchase authorization of up to 2.0 billion dollars, replacing the prior 1.5 billion dollar program, alongside an accelerated repurchase agreement funded by that loan, with an initial delivery of roughly 1,055,100 shares. The accelerated programme is expected to settle by fiscal year end on September 30, 2026, so the reported share count should fall in two steps rather than one.

On the policy side, the company said on July 1, 2026 that Fannie Mae and Freddie Mac had released historical data for its FICO Score 10T model. That is a small item with a large frame around it, because the same agency structure that governs such releases also determines which score models may be used for mortgages sold to those two buyers, a dependency the annual filing names directly as a revenue risk. Anything the company says on the July call about score adoption at the agencies carries more weight than the quarter's arithmetic.

Peer Cohorts (Per Segment, With Filing Citations)

Scores (reported)

• EFX (EQUIFAX INC)
• FY2025 10-K: …us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember us-gaap:DefinedBenefitPlanRealEstateMember 2025-12-31 0000033185 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel12And3Member us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember us-gaap:DefinedBenefitPlanCashMember 2025-12-31…
• FY2025 10-K: …us-gaap:FairValueInputsLevel1Member us-gaap:PensionPlansDefinedBenefitMember us-gaap:DefinedBenefitPlanEquitySecuritiesNonUsMember 2025-12-31 0000033185 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member us-gaap:PensionPlansDefinedBenefitMember…
• TRU (TransUnion)
• FY2025 10-K: SegmentsMember country:GB tru:InternationalMember 2023-01-01 2023-12-31 0001552033 us-gaap:OperatingSegmentsMember srt:AfricaMember tru:InternationalMember 2025-01-01 2025-12-31 0001552033 us-gaap:OperatingSegmentsMember srt:AfricaMember tru:InternationalMember 2024-01-01 2024-12-31 0001552033…
• FY2025 10-K: 52033 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2025-01-01 2025-12-31 0001552033 us-gaap:AccumulatedTranslationAdjustmentMember 2025-12-31 0001552033 us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember 2025-12-31 0001552033 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2025-12-31…
• VRSK (Verisk Analytics, Inc.)
• FY2025 10-K: …Samuel G. Liss /S/ CHRISTOPHER J. PERRY Director Christopher J. Perry /S/ SABRA R. PURTILL Director Sabra R. Purtill /S/ OLUMIDE SOROYE Director Olumide Soroye /S/ KIMBERLY S. STEVENSON Director Kimberly S. Stevenson /S/ THERESE M. VAUGHAN Director Therese M. Vaughan 97
• FY2025 10-K: …us-gaap:SubsequentEventMember vrsk:KeyEmployeesMember 2026-01-01 2026-01-31 0001442145 us-gaap:PerformanceSharesMember us-gaap:SubsequentEventMember vrsk:KeyEmployeesMember 2026-01-01 2026-01-31 0001442145 vrsk:NonqualifiedStockOptionMember us-gaap:SubsequentEventMember 2026-01-01 2026-01-31 0001442145…
• SPGI (S&P Global Inc.)
• FY2025 10-K: …us-gaap:SeniorNotesMember 2025-03-31 0000064040 spgi:SustainabilityLinkedSeniorNotes270Due2029Member srt:ScenarioForecastMember us-gaap:SeniorNotesMember us-gaap:SubsequentEventMember 2026-01-01 2026-03-01 0000064040 spgi:SeniorNotes4.25Due2031Member us-gaap:SeniorNotesMember 2025-12-04 0000064040…
• FY2025 10-K: …spgi:RatingsSegmentMember spgi:RestructuringPlan2024Member 2025-01-01 2025-12-31 0000064040 us-gaap:OperatingSegmentsMember spgi:RatingsSegmentMember spgi:RestructuringPlan2024Member 2025-12-31 0000064040 us-gaap:OperatingSegmentsMember spgi:EnergySegmentMember spgi:RestructuringPlan2025Member 2025-01-01 2025-12-31…
• MSCI (MSCI INC.)
• FY2025 10-K: …0001408198 2025 FY FALSE P3Y http://fasb.org/us-gaap/2025#OtherAccruedLiabilitiesCurrent P1Y iso4217:USD xbrli:shares iso4217:USD xbrli:shares xbrli:pure msci:segment 0001408198 2025-01-01 2025-12-31 0001408198 2025-06-30 0001408198 2026-01-30 0001408198 2025-12-31 0001408198 2024-12-31 0001408198 2024-01-01…
• FY2025 10-K: …us-gaap:DebtInstrumentRedemptionPeriodOneMember us-gaap:SeniorNotesMember 2025-11-06 2025-11-06 0001408198 msci:FivePointOneFiveZeroPercentSeniorUnsecuredNotesDueTwoThousandThirtySixMember us-gaap:DebtInstrumentRedemptionPeriodTwoMember us-gaap:SeniorNotesMember 2025-11-06 2025-11-06 0001408198…
• MORN (MORNINGSTAR, INC.)
• FY2025 10-K: DisclosureMember us-gaap:FairValueMeasurementsRecurringMember 2025-12-31 0001289419 us-gaap:DebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2025-12-31 0001289419 us-gaap:DebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember…
• FY2025 10-K: -31 0001289419 morn:PitchBookPlanRenewalFor2023Member us-gaap:PerformanceSharesMember 2025-12-31 0001289419 morn:PitchBookPlanRenewalFor2024Member us-gaap:PerformanceSharesMember 2025-12-31 0001289419 morn:PitchBookPlanRenewalFor2025Member us-gaap:PerformanceSharesMember 2025-12-31 0001289419…

Software (reported)

• PEGA (PEGASYSTEMS INC.)
• FY2025 10-K: …internal information systems departments that seek to modify their existing systems or develop their own proprietary systems and professional service organizations that develop their own products or create custom software in conjunction with rendering consulting services. Competitors vary in size, scope, and breadth…
• FY2025 10-K: …customers, and reducing risk. Along with our partners, we deliver solutions tailored by industry. 7 Our clients represent many industries, including: • Financial services - Pega's software for AI-powered decisioning and workflow automation is used by financial services organizations for Customer Engagement,…
• NICE (NICE LTD.)
• FY2025 20-F: …subject to compliance with applicable terms and conditions, which may impose certain obligations on us or our customers. Open-source software and Open-Weights AI Models are typically provided on an "as is" basis, without warranties, and the licensors generally do not provide indemnification, support, maintenance, or…
• FY2025 20-F: …competitive and we may be unable to compete successfully. The markets for our products, solutions and related services (also referred to elsewhere in this annual report as our "offerings") are, in general, highly competitive. Our competitors include a number of large, established software development vendors. Some of…
• ACIW (ACI WORLDWIDE, INC.)
• FY2025 10-K: …to protect our proprietary rights. We distribute our software products under software license agreements that typically grant customers nonexclusive licenses to use our products. Use of our software products is usually restricted to designated computers, specified locations and/or specified capacity, and is subject…
• FY2025 10-K: …obligations when sold with a software license. 50 Table of Contents Significant judgment is exercised by the Company in determining revenue recognition for these customer arrangements, and includes the following: • Determination of the term of a software license arrangement when early termination rights are provided…
• VERX (Vertex, Inc.)
• FY2025 10-K: $ 45,374 Internal systems and tools ​ 23,476 ​ 19,024 Total ​ $ 90,247 ​ $ 64,398 ​ In-process internal-use software developed is not depreciated until it is available for its intended use. Depreciation expense for internal-use software developed for cloud-based customer solutions for the years ended December 31,…
• FY2025 10-K: …business outcomes. Services Solutions Implementation Services. Due to the ubiquitous nature of our software in our customers' technology environments, we also offer implementation services to enable our customers to realize the full benefit of our solution at initial deployment. These software implementation services…
• JKHY (JACK HENRY & ASSOCIATES, INC.)
• FY2025 10-K: …revenue is generated from data and item processing services and hosting fees. The Company's arrangements for these services typically require the Company to "stand-ready" to provide specific services on a when and if needed basis. The fees for these services may be fixed or variable (based upon performing an…
• FY2025 10-K: Table of Contents No goodwill was acquired during fiscal 2025 and 2024. Goodwill consists largely of the growth potential, synergies and economies of scale expected from combining the operations of the Company with those of the entities or assets acquired, together with their assembled workforces. No goodwill has been…
• SPGI (S&P Global Inc.)
• FY2025 10-K: …these reserves, we consider, amongst other factors, the financial condition and risk profile of our customers, areas of specific or concentrated risk as well as applicable industry trends or market indicators. Capitalized technology costs We capitalize certain software development and website implementation costs.…
• FY2025 10-K: …market reports and commentary and analytics) along with other information products and software term licenses; • Sales usage-based royalties - primarily from licensing our proprietary market price data and price assessments to commodity exchanges; and • Non-subscription revenue - conference sponsorship, consulting…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

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.