FAIR ISAAC CORP. $42 (New York symbol FICO; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 34.9 million; Market cap: $1.5 billion; Price-to-sales ratio: 2.2; Dividend yield: 0.2%; TSINetwork Rating: Average; www.fico.com) makes FICO Scores, a computer program that helps businesses make better decisions about customer creditworthiness. It is also profiting by selling software that helps credit card issuers control fraud and analyze cardholders’ spending patterns.
The company is benefiting from the recovery of the U.S. banking industry and rising demand for mortgages. In addition, Fair Isaac is expanding internationally. It is now working with China’s central bank to develop a standard credit score. This has big potential, particularly as the country’s banking system matures.
In addition, Fair Isaac recently paid $113.0 million for Adeptra, a U.K.-based company whose systems let businesses communicate with customers through a range of channels, including voice, instant messaging, mobile applications and email.
Using Adeptra’s technology, businesses can contact their customers using their preferred channel. This lets them instantly resolve important matters, such as confirming payments, fixing customer service issues and identifying fraudulent transactions.
In the fiscal year ended September 30, 2012, Fair Isaac’s revenue rose 9.2%, to $676.4 million from $619.7 million in 2011. Earnings rose 28.5%, to $92.0 million from $71.6 million. Due to fewer shares outstanding, earnings per share jumped 42.5%, to $2.55 from $1.79. Fair Isaac’s ongoing cost cuts were a major reason for the increase.
The company holds cash and securities of $93.6 million, or $2.69 a share. Its long-term debt of $455.0 million is a manageable 30% of its market cap.
Fair Isaac will probably earn $2.88 a share in fiscal 2013, and the stock trades at 14.6 times that forecast. The $0.08 dividend yields 0.2%.
Fair Isaac is a buy.
