FAIR ISAAC CORP. $88.07 - New York symbol FICO

FAIR ISAAC CORP. $88.07 (New York symbol FICO; TSINetwork Rating: Average)(415-472-2211; www.fairisaac.com; Shares outstanding: 31.1 million; Market cap: $2.7 billion; Dividend yield: 0.1%) makes FICO Scores, the program that dominates the market for software businesses use to evaluate customer creditworthiness. Fair Isaac also profits by selling programs that help credit card issuers control fraud and analyze cardholders’ spending patterns.

In its fiscal 2015 second quarter, which ended March 31, 2015, Fair Isaac’s revenue rose 11.7%, to $207.1 million from $185.5 million a year earlier. The company saw higher sales at its applications division (65% of total revenue) on increased licensing revenue from software that detects bank fraud. Sales of credit scoring software and programs for analyzing large amounts of a business’s data were up 4%.

The company earned $18.9 million, down 9.1% from $20.8 million. It spent more on research and marketing, and that hurt its profits. Earnings per share were unchanged at $0.60 on fewer shares outstanding.

Fair Isaac spends around 12% of its revenue on research, which lets it produce innovative products that keep it ahead of the competition.

The company expects to earn $2.78 to $2.88 a share for all of fiscal 2015, and it trades at a high 31.1 times the midpoint of that range. As well, the banking industry supplies 75% of Fair Isaac’s revenue, and the likelihood of rising interest rates later this year could slow mortgage demand and hurt sales of its credit-scoring software.

Fair Isaac is a hold.

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