Fair Issac’s FICO shares have outperformed the Zacks Computer & Technology sector and Zacks IT Services industry peers Infosys INFY and ServiceNow NOW in the year-to-date period.

Shares of FICO, Infosys and ServiceNow have soared 86.8%, 28.1% and 59.7%, respectively. The broader sector has appreciated 34.1% over the same timeframe.

The robust stock price performance can be attributed to the strong performance in its Scores and Software segments, which led to significant growth in its clientele and revenues.

In the fourth quarter of fiscal 2024, the Scores segment experienced a 27% revenue increase, driven largely by a remarkable 95% year-over-year growth in mortgage originations.

FICO Expands Market Reach With New Partnerships

FICO is riding on the strong adoption of its FICO Scores, which remains a dominant player in the consumer credit scoring market.

The robust market position is further supported by the adoption of FICO Score 10-T for non-GSE mortgages in fourth-quarter fiscal 2024, covering more than $244 billion in annual originations and $1.33 trillion in servicing. This is set to boost future revenues through enhanced credit decision-making and securitization.

FICO recently teamed up with Mortgage Capital Trading (MCT) to integrate FICO Score 10-T into MCT Marketplace, helping mortgage lenders and investors enhance credit risk management and offer more favorable loan terms.

Fair Issac’s expanding clientele is further highlighted by its partnership with Cognizant CTSH to launch a cloud-based real-time payment fraud prevention solution powered by FICO Falcon Fraud Manager. The collaboration aims to enhance security measures and streamline fraud detection for clients across various industries.

FICO and Cognizant’s joint offering leverages AI and machine learning to help banks and other payment service providers in North America protect their customers from fraud.

FICO Benefits From Strong Demand for the FICO Platform

In the fourth quarter of fiscal 2024, FICO also experienced a strong 31% year-over-year growth in platform Annual Recurring Revenue, driven by the adoption of FICO Platform products and services. The platform’s Net Revenue Retention was 123%, showcasing the expansion in usage among existing customers.

Further enhancing FICO’s market presence, FICO entered into two major platform partnerships, one with Tata Consulting Services and another with iSON Xperiences. These collaborations expand FICO’s reach while leveraging its platform for real-time decision-making solutions in targeted industries.

FICO Offers Strong 2025 Outlook

FICO’s strong portfolio and growing clientele, particularly in its Scores and Software segments, drive continuous top-line growth and enhance its growth prospects.

Fair Issac expects total revenues of $1.98 billion for fiscal 2025. Non-GAAP earnings are expected to be $28.58 per share.

The Zacks Consensus Estimate for revenues is pegged at $2.01 billion, indicating year-over-year growth of 16.92%. 

The consensus mark for fiscal 2025 earnings is pegged at $29.81 per share, which increased 0.43% in the past 30 days and reflects 25.57% year-over-year growth.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

What Should Investors Do With FICO Stock?

Despite FICO’s strong portfolio and growing client base, the slowdown in mortgage origination due to rising interest rates and intense competition in both the Score and Software segments is expected to impact FICO’s top-line growth in 2025. 

FICO shares are also not cheap as suggested by a Value Score of F.

In terms of the forward 12-month Price/Sales ratio, FICO is trading at 25.65X, higher than its median of 18.56X and the Zacks Computers - IT Services sector’s 10.77X reflecting a stretched valuation. 

FICO currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Cognizant Technology Solutions Corporation (CTSH) : Free Stock Analysis Report

American Noble Gas Inc. (INFY) : Free Stock Analysis Report

Fair Isaac Corporation (FICO) : Free Stock Analysis Report

ServiceNow, Inc. (NOW) : Free Stock Analysis Report

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