FICO
FICO
$723.76
+2.73%
Fair Isaac Corporation (FICO) is an applied analytics company whose primary franchise is the FICO credit score, the de facto industry benchmark used by U.S. lenders to assess consumer creditworthiness, supplemented by a decision-management software business sold to banks and other institutions for analytics, workflow, fraud detection, and customer decisioning. The company operates as a quasi-monopoly in U.S. credit scoring with entrenched network effects and near-universal lender adoption, giving it exceptional pricing power that underpins its exceptionally high margins, while its software segment provides a secondary growth engine. The current investor narrative is dominated by a violent repricing of the stock: despite a Q4 fiscal 2026 earnings beat driven by Scores pricing and software growth (revenue up 27.4% year over year), the shares have collapsed amid regulatory overhang on the credit-score pricing model, mortgage-market uncertainty, and the absence of forward guidance, with sell-side firms trimming ratings (RBC cut to Sector Perform from Outperform, Wells Fargo to Equal Weight from Overweight) even as several maintain constructive stances. The debate now centers on whether the regulatory and mortgage-cycle risks are fully discounted in a stock that has lost more than half its value, or whether the pricing-power narrative that drove years of multiple expansion has structurally broken.…
FICO
FICO
$723.76
Related headlines
Investment Opinion: Should I buy FICO Today?
Rating: Hold with a constructive, valuation-aware bias. The core thesis is that FICO's reported fundamentals — 27.4% year-over-year Q4 revenue growth to $657.05 million, 86.9% gross margin, 49.9% operating margin, and $1.06 billion in trailing free cash flow — remain intact, while the shares have de-rated to 16.22x trailing and 13.71x forward earnings, but the unresolved regulatory threat to credit-score pricing and management's refusal to provide forward guidance prevent a clean Buy. The analyst consensus of 9 Buy / 10 Hold / 2 Sell with a recommendation mean of 2.48 and an average target of $821.79 (about +16.6% from $704.55) frames this as a cautiously constructive setup rather than a high-conviction call.
Supporting evidence is unusually strong on the fundamental side: the PEG of 0.45 and forward PE of 13.71x against an estimated EPS of $83.40 imply the market is pricing severe deterioration that has not appeared in results; gross margin actually rose from 82.96% in Q1 fiscal 2026 to 86.91% in Q4, showing no erosion of the pricing engine; the Scores segment generated $458.90 million of Q4's $657.05 million, confirming the high-margin franchise still drives growth; and free cash flow of $1.06 billion funded $2.27 billion of Q3 buybacks and $325 million of Q4 debt repayment. Against the software-application industry's typical high-20s-to-30s PE multiples, a 16.2x trailing multiple for a business with these margins and growth is a substantial discount that embeds regulatory and mortgage-cycle risk.
Three risks could invalidate the thesis: a binding regulatory constraint on credit-score pricing (which would hit roughly 70% of revenue directly), continued mortgage-market weakness, and further multiple compression given the 1.338 beta and -68.48% max drawdown. The rating would upgrade to Buy if management provides credible forward guidance or regulatory clarity emerges with the stock holding above the $820 region, and would downgrade to Sell on a decisive break below the $586.05 52-week low or a formal adverse regulatory action. On balance the stock looks undervalued relative to its own history (PE down from 87.7x in Q4 2024) and to peers, but fairly valued to slightly cheap relative to the genuine uncertainty — a value opportunity contingent on a binary regulatory outcome, not a clean bargain.
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FICO 12-Month Price Forecast
The forward view is genuinely two-sided: reported fundamentals — 27.4% revenue growth, 86.9% gross margin, $1.06 billion free cash flow — argue the 16x multiple is a deep-value opportunity, while the unresolved regulatory threat to credit-score pricing and the absence of forward guidance argue the market is correctly discounting a structural risk. The +16.6% implied upside to the $821.79 average target is modest relative to the -32% downside to the $481 low target, a risk/reward that supports a neutral stance rather than an aggressive one. The recent +3.34% one-month move and +8.33% relative strength versus the S&P 500 suggest tentative bottoming, but the -32.35% three-month decline confirms the intermediate trend remains negative. I would upgrade to bullish on credible regulatory clarity or reinstated guidance with the stock holding above the $820 region, and downgrade to bearish on a decisive break below $586.05 or formal adverse regulatory action.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on FICO's 12-month outlook, with a consensus price target around $821.79 and implied upside of +13.5% versus the current price.
Average Target
$821.79
21 analysts
Implied Upside
+13.5%
vs. current price
Analyst Count
21
covering this stock
Price Range
$481 - $1231
Analyst target range
Coverage is broad, with 19 analysts and a distribution of 9 Buy, 10 Hold, and 2 Sell, yielding a consensus recommendation of "buy" but a recommendation mean of 2.48 (on a 1-5 scale where lower is more bullish) that leans distinctly toward neutral. The average target price of $821.79 implies roughly +16.6% upside from the current $704.55, a modest but positive expected return that reflects the tug-of-war between attractive valuation and unresolved regulatory risk. The consensus is best characterized as cautiously constructive — more Hold than Buy, with recent rating actions skewing defensive (RBC's downgrade to Sector Perform and Wells Fargo's cut to Equal Weight in late October) even as Barclays, Jefferies, BMO, and Needham maintain Buy/Outperform stances.
The target range is extraordinarily wide — from a low of $481.00 (roughly -32% downside) to a high of $1,230.97 (roughly +75% upside) — a spread of more than 2.5x that signals very high uncertainty and weak conviction among analysts. The high target likely assumes regulatory risk fades, Scores pricing power persists, and the multiple re-rates back toward historical norms, while the low target prices in adverse regulatory action on credit-score pricing, mortgage-volume weakness, and continued multiple compression. The wide dispersion, combined with the recent cluster of downgrades and the absence of forward guidance from management, means price discovery is inefficient and volatility is likely to remain elevated; the stock's 1.34 beta and 68% max drawdown are consistent with a name where the range of outcomes is genuinely wide and position sizing should reflect that uncertainty.
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Bulls vs Bears: FICO Investment Factors
The bear case currently holds the stronger near-term evidence: a -57.93% one-year decline, a -68.48% max drawdown, a fresh cluster of analyst downgrades, no forward guidance, and an unresolved regulatory threat to the very pricing power that drove years of multiple expansion. The bull case rests on a genuine and striking disconnect — 27.4% revenue growth, 86.9% gross margins, $1.06 billion in trailing free cash flow, and a PE compressed from 87.7x to 16.22x — that suggests the market has priced in deterioration not yet visible in reported results. The single most important tension is whether the regulatory risk to FICO's credit-score pricing model is a bounded, quantifiable cost or a structural break in the pricing-power narrative; if it proves bounded, the stock is deeply undervalued, but if it proves structural, the 16x multiple is not cheap at all. Until that question is resolved, the wide $481-$1,231 target range and 1.34 beta argue for treating this as a high-uncertainty situation rather than a clean value opportunity.
Bullish
- Deep valuation de-rating to 16x: The trailing PE has collapsed from 87.7x in Q4 2024 to just 16.22x today, with a forward PE of 13.71x and a PEG of 0.45. For a business generating 86.9% gross margins and 27.4% revenue growth, this multiple embeds severe skepticism that has not shown up in reported results.
- Revenue accelerating despite selloff: Q4 fiscal 2026 revenue of $657.05 million grew 27.4% year over year versus $515.75 million, and quarterly revenue climbed from $511.96 million in Q1 to $674.19 million in Q3. The Scores segment drove $458.90 million of that Q4 total versus $215.29 million for Applications, confirming the pricing-power engine is intact.
- Exceptional profitability and cash generation: Operating margin of 49.9%, net margin of 33.0%, and trailing free cash flow of $1.06 billion (Q4 FCF of $284.34 million on $294.19 million operating cash flow) underpin the franchise. Gross margin even improved from 82.96% in Q1 2026 to 86.91% in Q4 2026, showing no erosion of the core pricing engine.
- Analyst targets imply upside: The $821.79 average target implies roughly +16.6% upside from $704.55, with a high target of $1,230.97 (+75%). Nine of 19 analysts rate Buy, and Barclays, Jefferies, BMO, and Needham maintain constructive stances even after the recent downgrades.
Bearish
- Catastrophic 58% drawdown: The stock is down 57.93% over one year and 57.13% year-to-date, with a maximum drawdown of -68.48%, trading at just 9.3% of its 52-week range ($586.05 low to $1,858.91 high). This is capitulation-level price action that has repeatedly punished dip buyers.
- Regulatory overhang on pricing model: The core Scores franchise faces regulatory risk on its credit-score pricing model, the central unresolved issue behind the de-rating. The September 30 news flow explicitly cited regulatory risk hitting FICO, and the absence of forward guidance from management leaves investors unable to quantify this exposure.
- No forward guidance, downgrade cluster: Management provided no forward guidance despite the Q4 beat, and RBC cut to Sector Perform from Outperform while Wells Fargo cut to Equal Weight from Overweight in late October. The recommendation mean of 2.48 on a 1-5 scale leans distinctly neutral, with 10 Holds versus 9 Buys.
- Extraordinarily wide target dispersion: Targets range from $481.00 (-32%) to $1,230.97 (+75%), a spread of more than 2.5x that signals very weak conviction and genuine uncertainty over outcomes. Such dispersion typically precedes continued volatility rather than a clean recovery.
FICO Technical Analysis
FICO is locked in a severe, sustained downtrend, with the 1-year price change at -57.93% and year-to-date performance of -57.13%, a catastrophic drawdown that has erased more than half the equity value in under twelve months. At the current price of $704.55, the stock sits at roughly 9.3% of its 52-week range (52-week low of $586.05, 52-week high of $1,858.91), meaning it is trading in the bottom decile of its annual range — a positioning that reflects capitulation rather than momentum, and while it can signal deep-value opportunity, the persistent lower highs argue against calling a bottom prematurely. The maximum drawdown of -68.48% underscores the violence of the de-rating and the risk of catching a falling knife.
Short-term momentum is showing tentative stabilization that diverges sharply from the longer-term collapse: the 1-month change is +3.34% versus the -57.93% one-year decline, and relative strength versus the S&P 500 over the past month is a striking +8.33% (against SPY's -4.99% one-month move), suggesting the stock is attempting to bottom even as the 3-month change of -32.35% and 6-month change of -37.43% confirm the intermediate trend remains deeply negative. This divergence — a positive one-month print against a brutal annual trend — is characteristic of either a mean-reversion bounce within a downtrend or the early stages of a base-building reversal, and it is too early to distinguish the two. Volume of roughly 676,298 shares on the latest session is unremarkable, and the short ratio of 2.07 days-to-cover indicates only moderate bearish positioning, not a crowded short that would fuel a violent squeeze.
Key technical levels are well defined: support rests at the 52-week low of $586.05, roughly 17% below the current $704.55, while resistance sits at the far-off 52-week high of $1,858.91, with intermediate overhead supply likely clustered around the $820-$930 area where the stock broke down in September. A decisive break below $586.05 would signal a continuation of the structural downtrend and likely trigger further momentum-driven selling, whereas reclaiming and holding above the $820 region would be the first meaningful evidence of a trend change. With a beta of 1.338, FICO is roughly 34% more volatile than the broad market, meaning position sizing must account for amplified drawdowns — a 1.34 beta in a name already down 58% on the year demands disciplined risk controls and smaller allocations than a market-neutral exposure would imply.
Beta
1.34
1.34x market volatility
Max Drawdown
-68.5%
Largest decline past year
52-Week Range
$586-$1859
Price range past year
Annual Return
-58.4%
Cumulative gain past year
| Period | FICO Return | S&P 500 |
|---|---|---|
| 1m | +8.4% | -3.3% |
| 3m | -30.3% | -2.3% |
| 6m | -32.0% | +1.4% |
| 1y | -58.4% | +12.2% |
| ytd | -56.0% | +10.4% |
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FICO Fundamental Analysis
The revenue trajectory remains robust and is arguably the most striking disconnect versus the share price: Q4 fiscal 2026 revenue of $657.05 million grew 27.4% year over year versus $515.75 million in the prior-year quarter, capping a fiscal year in which quarterly revenue climbed sequentially from $511.96 million (Q1) to $674.19 million (Q3) before the seasonal Q4 dip. The Scores segment generated $458.90 million versus $215.29 million for Applications, confirming that the high-margin credit-score franchise — the pricing-power engine — remains the dominant growth driver, with software providing a smaller but additive contribution. This accelerating top-line performance directly contradicts the -57.93% one-year share decline, implying the market is pricing a forward risk (regulatory action or mortgage-volume collapse) that has not yet appeared in reported results.
Profitability is exceptional and, if anything, improving: Q4 net income of $174.96 million on a 26.6% net margin, with gross margin of 86.9% and an operating margin of 49.9% — figures that place FICO among the most profitable software/analytics businesses in the market. Gross margin has been stable-to-rising across the trailing year (82.96% in Q1 2026 to 86.91% in Q4 2026), and while net margin compressed from Q2's 38.2% to Q4's 26.6%, that compression reflects a jump in operating expenses (SG&A of $225.43 million in Q4 versus $144.10 million in Q2) and higher interest expense rather than any erosion of the core pricing engine. The 86.9% gross margin is far above typical application-software levels and reflects the near-zero marginal cost of the credit-score product.
Balance-sheet optics are distorted by an aggressively negative equity position from years of buybacks — debt-to-equity of -1.36 and ROE of -21.56% are artifacts of negative book equity, not distress — while the more meaningful liquidity and cash metrics are solid: a current ratio of 0.99, trailing free cash flow of $1.06 billion, and Q4 free cash flow of $284.34 million on operating cash flow of $294.19 million. The company returned enormous capital via repurchases ($2.27 billion in Q3 2026 alone) and repaid $325 million of debt in Q4, and with a cash balance of $217.60 million and ROA of 41.0%, it generates ample internal cash to fund operations. The negative equity and negative book value (PB of -3.50) mean traditional leverage and book-based metrics are uninformative; investors should focus on the ~$1.06 billion FCF and the interest-coverage trajectory, which has been pressured by rising interest expense ($59.88 million in Q3 versus $31.38 million a year earlier).
Quarterly Revenue
$657049000.0B
2026-09
Revenue YoY Growth
+27.4%
YoY Comparison
Gross Margin
86.9%
Latest Quarter
Free Cash Flow
$1.1B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is FICO Overvalued?
Because FICO is solidly profitable (Q4 net income of $174.96 million), the PE ratio is the appropriate primary metric, and the valuation picture is genuinely bifurcated: the trailing PE of 16.22x sits dramatically below the forward PE of 13.71x, a gap that implies the market expects earnings to grow meaningfully into the forward period (consensus EPS estimate of $83.40 versus the current trailing figure). A trailing PE of 16.2x for a business with 86.9% gross margins and 27.4% revenue growth is remarkably cheap in absolute terms and reflects the market's skepticism that current earnings are durable given regulatory risk. The PEG ratio of 0.45 further suggests the stock is priced at a steep discount to its growth rate.
Relative to the software-application industry, FICO's trailing PE of 16.22x and forward PE of 13.71x represent a substantial discount to the sector's typical high-20s-to-30s multiples, even as its PS ratio of 5.34x and EV/Sales of 7.96x remain premium-ish on a revenue basis. The apparent contradiction — cheap on earnings, less cheap on sales — is explained by FICO's extraordinary 49.9% operating margin and 33.0% net margin, which are far above software-industry norms and mean the earnings multiple is the more informative lens. The EV/EBITDA of 16.66x is moderate for a franchise of this quality, and the discount to peers appears to price in regulatory and mortgage-cycle risk rather than any fundamental deterioration in the business.
Historical context is the most striking part of the valuation case: FICO's own PE ratio has compressed from 87.7x in Q4 2024 and 79.5x in Q1 2025 to just 16.22x today, and its PS ratio has collapsed from over 105x in late 2024 to 5.34x currently — a de-rating of historic proportions that places the stock at the very bottom of its multi-year valuation band. This extreme compression suggests the market has aggressively repriced the durability of FICO's pricing power, and the question for investors is whether that repricing overshot: at 16x trailing earnings with 27% growth and 87% gross margins, the stock is priced for significant fundamental deterioration that has not yet materialized in reported results, making it either a deep-value opportunity or a value trap depending on the regulatory outcome.
PE
16.2x
Latest Quarter
vs. Historical
Low-End
5-Year PE Range 18x~88x
vs. Industry Avg
31.1x
Industry PE ~31.1x*
EV/EBITDA
16.7x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks center on the fragility masked by headline profitability. Net margin compressed from 38.2% in Q2 2026 to 26.6% in Q4 as SG&A jumped to $225.43 million from $144.10 million in Q2, and interest expense climbed to $59.88 million in Q3 versus $31.38 million a year earlier, pressuring interest coverage. The current ratio of 0.99 and negative book equity (debt-to-equity of -1.36, PB of -3.50) mean traditional leverage metrics are uninformative and the company relies on ~$1.06 billion of trailing free cash flow to service debt and fund the $2.27 billion of buybacks executed in Q3 alone. Revenue concentration is acute: the Scores segment generated $458.90 million of Q4's $657.05 million, so any regulatory constraint on credit-score pricing hits roughly 70% of the top line directly, and the absence of forward guidance removes the visibility investors normally use to underwrite that concentration.
Market and competitive risks are dominated by valuation compression that may not be finished. Even after the collapse to 16.22x trailing and 13.71x forward earnings, the stock carries a 1.338 beta and has already suffered a -68.48% max drawdown, meaning it amplifies market moves by roughly 34% and remains vulnerable to further multiple compression if the regulatory outcome disappoints. The competitive threat is real: the August 13 news highlighted Upstart's AI-driven lending model growing rapidly at a discount, and alternative scoring approaches could erode the de facto benchmark status that underpins FICO's pricing power. Sector rotation away from high-multiple software and a Fed posture that keeps rates elevated (the September 4 jobs report raised rate-hike odds) would disproportionately hit a name already down 57.93% on the year.
The worst-case scenario is a specific chain: regulators impose a binding constraint on credit-score pricing, mortgage volumes stay depressed, management continues to withhold guidance, and the sell-side converges toward the $481 low target. From the current $704.55, that represents roughly -32%, and a break below the 52-week low of $586.05 (about -17%) would likely trigger momentum-driven selling toward that bear target. In a more severe outcome where the pricing-power narrative is deemed structurally broken, the -68.48% historical max drawdown is the relevant reference, implying losses approaching two-thirds of capital from the peak — an investor buying today should size positions assuming a realistic -17% to -32% downside to the 52-week low and bear target, with tail risk beyond that.
FAQ
The most severe risk is regulatory: the Scores segment generated $458.90 million of Q4's $657.05 million in revenue, so a binding constraint on credit-score pricing would hit roughly 70% of the top line directly, and the September 30 news flow explicitly flagged regulatory risk hitting FICO. Second is financial fragility beneath the headline profitability — net margin compressed from 38.2% in Q2 to 26.6% in Q4 as SG&A jumped to $225.43 million, interest expense rose to $59.88 million in Q3 from $31.38 million a year earlier, and the current ratio of 0.99 with negative equity (debt-to-equity of -1.36) leaves little cushion. Third is competitive disruption: Upstart's AI-driven lending model is growing rapidly at a discount, and alternative scoring approaches could erode the benchmark status underpinning FICO's pricing power. Fourth is market and multiple risk — a 1.338 beta, a -68.48% max drawdown, and a -57.93% one-year decline mean the stock amplifies market moves and remains vulnerable to further compression if the regulatory outcome disappoints.
The scenario framework assigns a 50% probability to the base case of $780-$860, in which the regulatory overhang persists without adverse action, revenue growth moderates to the high-teens to low-20s percent range, and the stock trades around the $821.79 average target (+16.6%). The 25% bull case targets $1,100-$1,231, requiring regulatory risk to prove bounded and mortgage volumes to stabilize so the multiple re-rates toward historical norms on $83.40 of forward EPS. The 25% bear case targets $481-$586, in which a binding pricing constraint and depressed mortgage volumes drive the sell-side toward the $481 low target and a break below the $586.05 52-week low. The base case is most likely because reported fundamentals — 27.4% revenue growth and $1.06 billion in free cash flow — remain intact while the regulatory question stays unresolved, keeping the stock range-bound. The key assumption behind it is that no adverse regulatory action materializes and management continues to withhold guidance, sustaining wide analyst dispersion.
On earnings, FICO looks undervalued: the trailing PE of 16.22x and forward PE of 13.71x are far below the software-application sector's typical high-20s-to-30s multiples, and the PEG of 0.45 implies the stock trades at a steep discount to its growth rate. The de-rating is historic — the PE has compressed from 87.7x in Q4 2024 and the PS ratio from over 105x to 5.34x today — placing the stock at the bottom of its multi-year valuation band. The counterpoint is that PS of 5.34x and EV/Sales of 7.96x are not cheap on a revenue basis, and the earnings multiple is only low because margins (49.9% operating, 33.0% net) are extraordinary and may not be durable if pricing is regulated. The market is therefore pricing a structural risk to FICO's pricing power rather than a temporary earnings dip; if that risk proves bounded, the stock is deeply undervalued, but if it proves structural, 16x is not cheap. Net, it screens as undervalued relative to history and peers, but fairly valued to slightly cheap relative to the genuine uncertainty.
From a risk/reward perspective the setup is asymmetric but genuinely two-sided: the $821.79 average analyst target implies about +16.6% upside from $704.55, while the $481 low target implies roughly -32% downside, and the stock already trades at just 9.3% of its 52-week range after a -57.93% one-year decline. The fundamental case is strong — 27.4% revenue growth, 86.9% gross margin, $1.06 billion in trailing free cash flow, and a PEG of 0.45 — but the unresolved regulatory threat to credit-score pricing, which touches roughly 70% of revenue, and management's refusal to provide forward guidance keep conviction low. The consensus of 9 Buy / 10 Hold / 2 Sell with a 2.48 recommendation mean reflects that tension rather than resolving it. It is a reasonable buy only for investors with a multi-year horizon, tolerance for a 1.338 beta, and position sizes that assume a realistic -17% to -32% drawdown to the 52-week low or bear target; for those needing near-term certainty, it is a Hold at best.
FICO is better suited to long-term holding than short-term trading, but only for investors who can tolerate significant volatility along the way. The business is a mature, high-margin franchise (86.9% gross margin, 49.9% operating margin) with $1.06 billion in trailing free cash flow and no dividend, so total return depends entirely on earnings growth and multiple re-rating rather than income. The 1.338 beta, -68.48% max drawdown, and -32.35% three-month decline mean short-term price action is dominated by regulatory headlines and analyst revisions rather than fundamentals, making tactical trading hazardous. Earnings visibility is currently poor because management provides no forward guidance, which argues against short-horizon positioning. A minimum holding period of two to three years is appropriate, allowing time for the regulatory question to resolve and for the compressed 13.71x forward multiple to normalize if the pricing-power narrative holds.