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Topic: Growth Stocks

FAIR ISAAC CORP. $93 – New York symbol FICO

FAIR ISAAC CORP. $93 (New York symbol FICO; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 31.1 million; Market cap: $2.9 billion; Price-to-sales ratio: 3.5; 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. FICO Scores dominates this niche market. Fair Isaac also sells software that helps credit card issuers control fraud and analyze cardholders’ spending patterns.

In January 2015, Fair Isaac paid $59.6 million for Tonbeller, a German firm whose software helps banks and insurance companies detect and prevent money laundering and fraud.

In its fiscal 2015 second quarter, which ended March 31, 2015, the company’s revenue increased 11.7%, to $207.1 million from $185.5 million a year earlier. Tonbeller contributed $3.2 million to revenue in the latest quarter.

Fair Isaac 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 and analytics software were up 4%. Earnings in the quarter fell 9.1%, to $18.9 million from $20.8 million, as the company spent more on research and marketing. 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 stock has jumped over 50% in the past year and now trades at a high 32.5 times the $2.86 a share the company will probably earn in fiscal 2015. As well, the banking industry supplies 75% of Fair Isaac’s revenue, and the likelihood of rising interest rates later in 2015 could slow mortgage demand and hurt sales of its credit-scoring software.

Fair Isaac is a hold.

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