The Bull Rankings scorecard — our quality-growth score is 87.4 / 100, built from three pillars scored 0–100: Quality 91, Growth 89, Value 82 (valuation is judged against sector peers). At today's price, our reverse-DCF read says the market is implicitly betting on free-cash-flow growth of about 10% a year next year, fading to 4% a year by year ten — a gauge of how much optimism is already in the stock.
The thesis
In the quarter ended 2026‑06‑30, revenue surged 24.1%, free‑cash‑flow rose to $996 m, and the profit margin held at 34.1%. These figures confirm that the business is not only profitable but also expanding at a pace that outstrips the implied growth in the reverse‑DCF. Our model’s Quality‑Growth‑Value score of 87.4/100 is anchored by that quality pillar, while the value pillar at 82 signals that the stock is still priced on the cheap side of its peers. The strongest signal—Buying back stock—shows management is actively returning capital, a classic moat‑building move.
What the business actually is
FICO sells analytics software and scoring solutions. Its Scores segment delivers business‑to‑business credit and other predictive scores that plug directly into transaction streams, while the Software segment offers pre‑configured analytic and decision‑management solutions for account origination, customer management, and engagement. The consumer arm, myFICO.com, provides subscription‑based personal credit tools. The Scores segment, with its deep integration into financial institutions, is the engine behind the company’s recent 24.1% revenue growth.
Why it can (or can't) keep compounding
The moat is built on data dominance and integration. FICO’s scores are embedded in the underwriting pipelines of banks and insurers; replacing them would require competitors to amass comparable data sets and earn trust in real‑time decision systems. The profit margin of 34.1% is a testament to the high switching costs and the low incremental cost of adding new clients to an already scaled platform. Moreover, the Durable high returns signal indicates that capital deployed in the business continues to generate robust cash flows, a feature that deters copycats. Competitors can develop scoring models, but matching the breadth of FICO’s data and the depth of its integration would take years and significant capital.
The valuation question
At a P/E of 20.0, FICO trades below the technology median of roughly 40th percentile, suggesting the market is not overpaying for its earnings. However, the reverse‑DCF tells a different story: today’s price implies free‑cash‑flow growth of about 10% in year one, tapering to 4% by year ten. That starting rate is lower than the trailing revenue growth of 24.1%. In plain terms, the market has priced in a slowdown; it is not betting on the business to keep growing at the pace it has just delivered. The PEG ratio of 0.58 further underscores that the stock is valued on the cheap side, yet the implied growth lag indicates a cautious outlook from investors.
The bear case
The most compelling risk is the weakest pillar—Value at 82. While 82 is still on the cheap side, it is the lowest of the three pillars, meaning the stock’s price is already stretched relative to its peers. If the company’s free‑cash‑flow were to decline or if the profit margin slipped below 34.1%, the valuation would tighten further. A concrete signal that would confirm this scenario is a drop in the free‑cash‑flow below $996 m, or a margin erosion to below 30%. Such a shift would erode the cushion that keeps the stock attractive despite the implied growth lag.
What would change our mind
- Revenue growth falling below 20% in the next quarter would erode the quality pillar and push the score below 80, weakening the thesis.
- Profit margin slipping below 30% would signal cost pressures and diminish the durability argument.
- Free‑cash‑flow growth dropping below 5% in the next year would confirm that the market’s implied slowdown is justified, turning the current upside into a downside.