FAIR ISAAC CORP. $54.86 - New York symbol FICO

FAIR ISAAC CORP. $54.86 (New York symbol FICO; TSINetwork Rating: Average) (415-472-2211; www.fairisaac.com; Shares outstanding: 32.1 million; Market cap: $1.8 billion; Dividend yield: 0.2%) makes FICO Scores, the program that dominates the market for software that businesses use to evaluate customer creditworthiness. The company is also profiting by selling programs that help credit card issuers control fraud and analyze cardholders’ spending patterns.

In its fiscal 2014 third quarter, which ended June 30, 2014, Fair Isaac’s earnings per share rose 9.1%, to $0.60 from $0.55 a year ago.

Revenue gained 7.5%, to $197.6 million from $183.8 million. The company saw stronger sales at its main applications division (66% of the total) on increased licensing revenue from software that detects bank fraud. That offset a decline in sales of creditscoring software and customized programs for analyzing large amounts of a business’s data.

Fair Isaac continues to spend around 10% of its revenue on research. That lets it keep producing innovative products that help it stay ahead of its competitors.

Meanwhile, the company’s balance sheet remains sound: it holds cash of $101.8 million, or $3.17 a share. Its total debt of $530.0 million is a manageable 29% of its market cap.

For all of fiscal 2014, Fair Isaac expects to earn $2.53 to $2.60 a share. The stock trades at a high 21.4 times the midpoint of that range. As well, the banking industry accounts for 75% of the company’s revenue, and slowing mortgage demand could hurt sales of its credit-scoring software.

Fair Isaac is a hold.

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