QS Research · Michael Burry's Scion Capital analyst template · 2006
FAIR ISAAC CORP (FICO)
As of 2026-11-11 · 12/15 boxes filled from SEC filings and market data
Report price $730.66 (close 2026-11-10)
Conclusion: LONG
Conviction medium · base case +46% · downside -24% · upside +54%
At $730.66 the market is capitalizing FY Sep 2026 net income of $835.0M at 18.7x and EBITDA of $1.28B at 16.1x, effectively treating the FHFA/HUD VantageScore opening and the withheld FY2027 guide as a permanent impairment. I use the independent peer-median P/E anchor of 27.35x from N60, which gives $1,068.64 or +46%; a downside with 10% lower TTM earnings and a ~15.9x compressed P/E gives about -23.5%, and a 22.7x EV/EBITDA upside on $1.28B EBITDA gives $1,123 or +54%. The 2026-11-04 Q4 release is the dated rerating catalyst: revenue rose 27% to $657.0M, non-GAAP EPS was $11.10, software ARR was +14% with platform ARR +72%, and management described FICO Preferred Program deals already announced for calendar 2027. The market is missing that the mortgage-score franchise is still growing on price and that the cash engine (42.2% FCF margin, 80.1% ROIC) funds a 19.46% net buyback yield; the risks are real but the base/downside/upside skew is long.
Key numbers
- Share price: $730.66
- Market cap: $15.62B
- Latest financial period: FY Sep 2026 to Sep 30, 2026
- Revenue (FY Sep 2026): $2.53B
- EV / EBITDA (FY Sep 2026): 16.1x
- P/E (FY Sep 2026): 18.7x
- FCF yield: 6.8%
- Earnings-quality flags (FY Sep 2026): none flagged
- P/E, operating (tax-normalized) (FY Sep 2026): 16.3x
- EV / FCF (FY Sep 2026): 19.3x
- Revenue growth (latest fiscal year): +27.3%
- ROIC (FY Sep 2026): 80.1%
- WACC: 7.2%
- Economic profit spread: +72.9 pts
The 15 boxes
- ✓ 1. Long-form business notes
FICO reports two operating segments in the latest 10-K: Scores, where consumer reporting agencies pay FICO a fee per score generated and FICO also sells B2C myFICO subscriptions, and Software, sold mainly as multi-year usage-based subscriptions anchored by FICO Platform. The segment structure differs from the FY2020 10-K, which listed three segments (Applications, Scores, Decision Management Software). FY2026 revenue was $2.53B, operating income $1.27B and operating cash flow $1.07B, with Experian/TransUnion/Equifax at 60% of total revenue and financial services at 92%.
- ✓ 2. Competitive advantage
FICO's advantage is a regulatory/commercial licence in U.S. mortgage scoring plus proprietary model trade secrets and data, and the numbers show it has been priced like a moat: operating margin rose from about 38% in FY2021 ($505.5M on $1.32B) to about 50% in FY2026 ($1.27B on $2.53B), with $1.07B of FY2026 operating cash flow against $2.1M of capex. But the moat is being prised open: the FHFA accepted VantageScore from approved lenders in April 2026 and from all lenders in September 2026, and HUD will permit VantageScore for FHA-insured mortgages from 1 January 2027. Competition is named and deep-pocketed (the three CRAs, which are also partners and VantageScore owners; IBM, SAS, Pegasystems; LLM developers), and the 10-K's computed risk-factor diff flags 14 new or wholly rewritten paragraphs including AI/LLM substitution.
- ✓ 3. 10-Q takeaways
Q3 FY2026 (quarter ended June 30, 2026) revenue rose 26% to $674.2M, led by Scores +41% while Software grew 2%; operating income was $362.6M and diluted EPS was $10.45. Management raised FY2026 guidance to $2.53B revenue and $36.86 GAAP EPS ($42.43 non-GAAP EPS). Q3 operating cash flow was $380.4M and nine-month operating cash flow was $777.9M; Q3 buybacks were $2.3B and total debt was $5.6B. The 10-Q reports no material risk-factor changes; a later computed 10-K diff flags VantageScore/FHFA/HUD risk paragraphs.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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