FAIR ISAAC CORP. $92.85 - New York symbol FICO

FAIR ISAAC CORP. $92.85 (New York symbol FICO; TSINetwork Rating: Average) (415-472-2211; www.fairisaac.com; Shares outstanding: 31.1 million; Market cap: $2.8 billion; Dividend yield: 0.1%) makes FICO Scores, the program that dominates the market for software that 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 third quarter, which ended September 30, 2015, Fair Isaac’s revenue rose 5.0%, to $232.8 million from $221.6 million a year earlier. Sales at the company’s applications division (64% of the total) fell 1.6% on weaker demand for marketing and fraud-detection software. However, sales of creditscoring programs (25%) jumped 24.5%, while sales of analytics software (11%) gained 8.7%. The company earned $50.9 million, up 15.2% from $44.2 million. Earnings per share rose 18.0%, to $1.57 from $1.33, 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. Excluding unusual items, the company expects to earn $4.43 to $4.55 a share for all of fiscal 2016, and the stock trades at 20.7 times the midpoint of that range. That’s a somewhat high multiple, as the banking industry supplies 75% of Fair Isaac’s revenue, and the likelihood of rising interest rates over the next year could slow mortgage demand and hurt sales of its credit-scoring software. Fair Isaac is a hold.

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