Fair Isaac Corp. $23 – New York symbol FIC

FAIR ISAAC CORP. $23 (New York symbol FIC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 48.5 million; Market cap: $1.1 billion; WSSF Rating: Average) makes software that helps banks and businesses calculate the likelihood that a borrower will pay back a loan. Despite new competition, its FICO scoring system is still an industry standard. The subprime mortgage crisis has hurt the banks and other financial institutions that supply roughly half of Fair Isaac’s revenue. These customers may cut back on software spending in the near term. However, over the longer term, the subprime crisis will likely increase demand for Fair Isaac’s reliable credit-scoring software. The company now hopes a new restructuring plan will improve its profitability. It plans to sell several non-core operations, reduce staff and consolidate facilities. These moves should cut its annual pre-tax expenses by $35 million. In its third fiscal quarter ended June 30, 2008, Fair Isaac’s earnings fell 28.0%, to $18.8 million from $26.1 million a year earlier. Per-share earnings fell 17.4%, to $0.38 from $0.46, due to a 14% drop in the number of shares outstanding. Earnings in the latest quarter included restructuring charges of $1.4 million or $0.03 a share. Revenue declined 6.8%, to $183.3 million from $196.6 million. The stock now trades at 15.3 times the $1.50 a share it should earn in fiscal 2008. It also trades at 1.5 times its revenue of $15.20 a share. The $0.08 dividend yields 0.3%. Fair Isaac is a buy.

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