🔥 FICO down almost 50%: brutal results and about 20× forward P/E. Is it time to buy? $FICO

Fair Isaac's latest results forced me to look at this company much more deeply.

And the more I dig into it, the more I like it.

The stock fell from its 52-week high of around $1,998 to around $1,035.

That's a roughly -48% drop.

Yet the business certainly does not look like it's falling apart.

Quite the opposite.

Q3 FY2026

📈 Revenue: +26% 💰 Net income: +30% 🚀 GAAP EPS: +41% 💵 Free cash flow: +34%

Revenue reached about $674 million, free cash flow was about $370 million, and non-GAAP EPS came in at $12.18.

But the biggest madness is the Scores segment.

Scores revenue: roughly $459 million. Scores operating income: roughly $417 million.

That means an operating margin of around 91%. 😅

Yes.

91%.

And what's even crazier is that revenue from Scores grew by about $135 million year-on-year, and almost all of that amount flowed through to operating profit.

This is pricing power in its purest form.

Why does FICO have such brutal pricing power?

FICO is deeply embedded in the US financial system.

Banks, mortgages, loans, underwriting, risk management.

When FICO raises the price of its scores, the cost of producing another score is virtually unchanged.

A large part of the price increase therefore flows straight to profit.

And that's exactly what we're seeing today.

But beware, it's not without risk

Virtually all of the year-on-year growth in Scores revenue this quarter came from mortgage scoring, and above all from higher prices.

So I definitely won't be extrapolating +26% revenue growth or +41% Scores growth over the next ten years.

That would be naive.

Moreover, for the first time in many years, FICO is facing real competition from VantageScore 4.0 in US mortgages.

So the moat hasn't disappeared, in my view.

But after decades, FICO will have to actually defend it.

And this is probably the biggest question of the whole investment thesis.

The Software part: weak on the surface, interesting underneath

The second part of the company is Software.

At first glance, nothing amazing.

Software revenue grew by only +2%.

But underneath, the story is completely different.

🔹 FICO Platform ARR: +62% 🔹 Platform DBNRR: 148% 🔹 Total Software ARR: +10% 🔹 Legacy / non-platform ARR: -17%

The old products are gradually being phased out and replaced by the modern FICO Platform.

And in my view, the Platform could be another growth engine once the negative impact of legacy software fades away.

This is important.

Because if an investor only looks at the headline Software revenue of +2%, they might think the software is stagnating.

But the reality is more that the old products are dragging down the whole, while the modern platform is growing very fast.

Buybacks: here I might differ from many investors

And then we have the buybacks.

In the first nine months of FY2026, FICO bought back roughly $3.05 billion of its own shares.

Diluted share count fell from about 24.6 million to 22.7 million year-on-year.

That's a drop of roughly 7.6%.

That's why net income grows by 30%, but EPS grows by as much as 41%.

And here I might differ from many investors:

I like these buybacks.

A buyback is not automatically good or bad.

It mainly depends on the price at which the company buys its own shares.

When a company buys back overpriced shares at 50× earnings, it can destroy value.

But when a high-quality company takes advantage of a major price drop and buys back a large chunk of itself at a more reasonable valuation, that can be a very good use of capital for the remaining shareholders.

Imagine a company divided into 100 pieces.

The company buys back and cancels 10 pieces.

Your one piece suddenly represents a larger stake in the whole business, its earnings, and its future cash flow.

With FICO, three engines could be working at once:

📈 growth of the business itself 💰 growth in earnings and FCF 🔥 declining share count

And the result could be very handsome long-term EPS-per-share growth.

But the debt needs to be watched

Of course, the buybacks were partly funded by debt.

FICO's debt already stands at about $5.6 billion.

This needs to be monitored.

I don't want the company to endlessly increase leverage just to buy its own shares.

That would no longer be reasonable.

But if the pace of buybacks slows after this aggressive repurchase, FCF continues to grow, and the company starts gradually deleveraging, I personally don't see a problem.

But yes.

Debt is a real risk.

Valuation

And now the valuation. 👀

At a price of around $1,035:

FY2026 adjusted EPS guidance is $42.43.

That means roughly 24× FY2026 adjusted earnings.

But the current analyst consensus for FY2027 is around $53 in adjusted EPS.

1,035 / 53 = roughly 19.5× FY2027 earnings.

And that's where it starts to get really interesting for me.

At roughly 19 – 20× future adjusted earnings, I'm not buying an average company growing 5% annually.

I'm buying a business with:

🔥 a practically inimitable position 🔥 extreme pricing power 🔥 Scores margins around 91% 🔥 an asset-light model 🔥 growing free cash flow 🔥 a fast-growing software platform 🔥 and a management that is aggressively reducing the share count

I like that.

It's not cheap like a cigar-butt value stock.

But for such a business, after the drop, it's starting to make great sense to me.

The biggest risks

For me, the biggest risks are clear:

🔻 VantageScore 4.0 and the loss of part of the monopoly in mortgage scoring 🔻 too aggressive price increases 🔻 higher indebtedness after buybacks 🔻 possible regulatory pressures 🔻 the risk that Scores growth normalizes faster than the market expects 🔻 the risk that the Software Platform won't be enough to offset the legacy decline

So no, FICO is not a risk-free stock.

And I definitely wouldn't count on Scores revenue growing at 40% annually forever.

That would be excessive.

But if FICO remains the dominant standard, the Software Platform continues to grow, and FCF/EPS grow fast enough over the coming years…

then roughly 20× FY2027 adjusted earnings for such a business seems damn interesting to me.

My conclusion

After this pullback, FICO has climbed very high onto my watchlist. 👀🔥

Not because risks don't exist.

But because the quality of the business is extreme.

The Scores segment has brutal margins, pricing power is still visible, the Software Platform is growing very fast, and buybacks at a lower valuation could significantly help EPS.

For me, the question is simple:

After falling almost 50%, is FICO still expensive, or is the market finally offering one of the highest-quality financial-software infrastructure companies at a reasonable price?

What do you think?

Is roughly a 20× forward P/E for FICO an opportunity, or is the risk from VantageScore and the debt too great?

This is not investment advice. It's my personal view of the company.