FAIR ISAAC CORP. (New York symbol FICO; www.fairisaac.com) makes FICO Scores, the computer program that dominates the market for software that businesses use to evaluate customer creditworthiness. The company is also profiting by selling software that helps credit card issuers control fraud and analyze cardholders’ spending patterns. In its fiscal 2014 first quarter, which ended December 31, 2013, Fair Isaac’s earnings per share before one-time items fell 17.0% from a year ago, to $0.73 from $0.88. Revenue fell 3.0%, to $184.3 million from $190.0 million. The declines mostly resulted from a strong year-earlier quarter that included a big order from a major customer. Fair Isaac continues to spend around 9% of its revenue on research. The company holds cash of $96.0 million, or $2.75 a share. Its long-term debt of $447.0 million is 25% of its market cap. The $0.15 quarterly dividend yields 0.2%.
Tech stocks: Broadridge can count on recurring fees for two-thirds of revenue
BROADRIDGE FINANCIAL SOLUTIONS (New York symbol BR; www.broadridge.com) serves the investment industry in three main areas: investor communications, securities processing and transaction clearing. It processes 90% of all proxy votes in the U.S. and Canada. Without one-time items, the company earned $31.2 million in its fiscal 2014 second quarter, which ended December 31, 2013. That’s up 43.1% from $21.8 million a year earlier. Earnings per share rose 47.1%, to $0.25 from $0.17, on fewer shares outstanding. Overall revenue gained 5.6%, to $520.6 million from $493.2 million. Revenue from contracts that pay recurring fees rose 9% and accounted for two-thirds of the total. The remaining third comes from one-time events, such as special shareholder meetings and distributing information when mutual funds change managers. The company’s long-term debt of $524.1 million is 11.6% of its market cap, and it holds cash of $240.3 million, or $2.02 a share. The stock yields 2.3%. In the latest edition of Stock Pickers Digest, we look at Fair Isaac’s prospects for growth based on its high research spending as well as the company’s earnings outlook. We also consider Broadridge’s prospects for growth in 2014. We conclude with our clear buy-hold-sell-advice on these two stocks. (Note: If you are a current subscriber to Stock Pickers Digest, please click here to view Pat’s recommendation. Be sure to log in first.) If you’re a member of Pat’s Inner Circle and you’d like to ask a question about today’s article, please go to the question page reserved for you (be sure you’re logged in first). Click here to ask your question. COMMENTS PLEASE—Share your investment knowledge and opinions with fellow TSINetwork.ca members As the financial services industry keeps growing, do you look for tech stocks that are tied into the industry? Do you choose these stocks for short-term gains, or do you look for stocks that have the potential to dominate their chosen niche and continue to grow?
