Fair Isaac

Methodology

FICO's credit scoring business generates highly predictable earnings from recurring revenue tied to mortgage originations and credit card volumes. The FICO Score monopoly provides exceptional pricing power and visibility. Fair value calculations work well when normalizing for mortgage cycle impacts and accounting for high-single to double-digit earnings growth from Score pricing and software expansion.

Methodology

FICO consistently trades at PEG ratios between 3.0-5.0x, reflecting extreme premium valuations for its unassailable credit scoring franchise and consistent price increases. The company's software analytics business adds growth diversification. PEG appears very expensive but reflects one of the strongest economic moats in software with pricing power that compounds earnings reliably.

Methodology

FICO doesn't pay dividends and uses all free cash flow for aggressive share buybacks that reduce share count meaningfully over time. Management prioritizes capital returns through repurchases rather than dividends. Total return depends on continued FICO Score pricing power and successful expansion of analytics software beyond credit scoring applications.