Fair Isaac Corporation (FICO): A Bull Case Theory

We came across a bullish thesis on Fair Isaac Corporation (FICO) by @FluentInQuality on X (Twitter). In this article, we will summarize the bulls’ thesis on FICO. Fair Isaac Corporation (FICO)'s share was trading at $1503.62 as of 27^th May. FICO’s trailing and forward P/E were 64.76 and 51.28 respectively according to Yahoo Finance.

Fair Isaac (FICO), the company behind the widely used credit score, has dropped 23% since May 18, creating a compelling opportunity for quality-focused investors. The business remains a durable compounder, underpinned by its transition to a cloud-based platform model through the Decision Management Suite. This shift is driving recurring, high-margin SaaS revenue deeply embedded in client operations—particularly in mission-critical functions like credit, fraud detection, and marketing, where FICO’s explainable, regulatory-compliant AI tools are in high demand.

The FICO Score itself remains an industry standard, giving the company pricing power and stable income. Longstanding relationships with major financial institutions also create a natural upselling flywheel. Meanwhile, FICO is a disciplined capital allocator and aggressive share cannibal, using robust free cash flow to repurchase stock, enhancing EPS and shareholder value. Its gross, operating, and free cash flow margins have steadily expanded over the past decade, showcasing strong pricing power and growing operational leverage.

ROIC and ROCE have also surged, confirming exceptional capital efficiency and a widening economic moat. Platform ARR has grown over 390% since 2020, and platform DBNRR stands at 110%, signaling strong customer loyalty and expanding usage. While traditional revenue streams like credit scores still grow at healthy double-digit rates, the cloud-native platform is driving the next leg of FICO’s growth. A reverse DCF suggests current pricing bakes in 25.9% annual growth—likely aggressive. A more reasonable 22% CAGR still points to strong upside. Though not a screaming buy yet, FICO is nearing attractive levels, with high-quality fundamentals, shareholder-friendly capital deployment, and powerful long-term tailwinds.

Previously, we have covered Fair Issue Corporation (FICO) in May 2025, wherein we summarized a bullish thesis by Ryan Reeves on Substack. The author highlighted FICO’s dominant market position, strong pricing power, and high margins, noting its critical role in credit underwriting despite potential regulatory risks. Since our last coverage, the stock is down 23% as of 28^th May.

Fair Isaac Corporation (FICO) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 68 hedge fund portfolios held FICO at the end of the first quarter which was 60 in the previous quarter. While we acknowledge the risk and potential of FICO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than FICO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.