A Look At Fair Isaac (FICO) Valuation As New MeridianLink And Grab Finance Partnerships Expand Its Credit Reach

Fair Isaac (FICO) has been in focus after announcing a partnership with MeridianLink that plugs its Mortgage Direct License Program into MeridianLink’s platform, alongside a separate collaboration with Grab Finance across Southeast Asia.

See our latest analysis for Fair Isaac.

Despite the MeridianLink and Grab Finance partnerships highlighting new use cases for its software, Fair Isaac’s share price has seen a 12.78% 30 day decline and a 16.82% year to date share price return, while its 5 year total shareholder return of 193.93% points to a very different long term picture.

If this kind of credit technology story interests you, it could be a good moment to broaden your watchlist with 22 top founder-led companies and see what other businesses are building long run value.

With the share price down 20.55% over 90 days but a 5 year total shareholder return of 193.93%, plus partnerships feeding into both U.S. mortgages and Southeast Asian credit, is this a reset that offers upside, or is future growth already priced in?

Most Popular Narrative: 32.4% Undervalued

With Fair Isaac last closing at $1,366.93 against a narrative fair value of $2,023.18, the most followed view sees substantial upside built into its long term cash flows.

The ongoing transition to SaaS and cloud-based delivery, evidenced by double-digit growth in FICO Platform ARR and emphasis on conversion to next-generation AI-driven decisioning solutions, is increasing recurring revenues, supporting margin expansion and greater earnings predictability.

Read the complete narrative. Read the complete narrative.

Want to see how recurring software, higher margins, and a premium earnings multiple all fit together into one valuation story? The core of this narrative rests on compounding revenue, fatter profit margins, and a rich future P/E that still assumes discipline in discounting those cash flows. Curious which growth and profitability assumptions need to line up for that $2,023.18 figure to hold?

Result: Fair Value of $2,023.18 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, this hinges on mortgage related regulation and competition, as FHFA lender choice and potential VantageScore adoption could pressure FICO’s pricing power and margins.

Find out about the key risks to this Fair Isaac narrative.

Another Way To Look At Valuation

The earlier fair value of $2,023.18 suggests upside, but the current P/E of 49.3x tells a different story. That is well above the US Software industry at 25.4x, its peer average at 35.5x, and our fair ratio of 36.5x, which points to valuation risk if expectations cool.

Numbers like these can be tough to reconcile. It is worth asking yourself whether FICO’s growth, margins, and risk profile really justify staying this far above both peers and that fair ratio, or if the share price could drift closer to those lower multiples over time.

See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

After weighing the upbeat narrative against the rich P/E and the mix of risks and rewards, it makes sense to move quickly and check the data for yourself so you can build your own conviction, starting with 4 key rewards and 2 important warning signs.

Looking for more investment ideas?

If FICO has sharpened your interest in credit and software, do not stop here. Broaden your view now and give yourself more options to compare.

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• Reduce surprises by focusing on steadier names using the 80 resilient stocks with low risk scores, so you are not only chasing stories but also managing downside.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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