FAIR ISAAC CORP. $56 - New York symbol FICO

FAIR ISAAC CORP. $56 (New York symbol FICO; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 32.2 million; Market cap: $1.8 billion; Price-to-sales ratio: 2.7; Dividend yield: 0.1%; TSINetwork Rating: Average; www.fico.com) makes FICO Scores, a computer program that helps businesses make better decisions about customer creditworthiness. It also makes software that helps credit card issuers control fraud and analyze their cardholders’spending patterns.

In its 2014 third quarter, which ended June 30, Fair Isaac earned $29.2 million, down 0.1% from $29.3 million a year earlier. Earnings per share rose 3.8%, to $0.83 from $0.80, on fewer shares outstanding.

Overall revenue gained 7.5%, to $197.6 million from $183.8 million. Revenue from its applications division (66% of the total) rose 12.9% on increased licensing fees from software that detects bank fraud.

Revenue from the tools division (11%), whose products let clients create their own programs for automating routine business decisions, increased 3.6%.

These gains offset a 3.9% revenue decline at the scores division (23%), on lower demand for creditscoring software and customized programs for analyzing large amounts of a business’s data.

The company continues to spend 10% of its revenue on research. That hurts its earnings, but lets it keep producing innovative products that keep it ahead of its competitors.

For all of fiscal 2014, Fair Isaac expects to earn $2.53 to $2.60 a share. The stock is down 18% from its peak of $66 in July 2014. Even so, it trades at a high 21.8 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. The $0.08 dividend yields 0.1%.

Fair Isaac is a hold.

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