By Cheng Xin,Contributor,Trefis Team

Copyright forbes

CHONGQING, CHINA – JULY 28: In this photo illustration, a smartphone displays the logo of Fair Isaac Corporation (NYSE: FICO), an American data analytics company best known for its FICO credit scores, in front of a screen showing the company’s latest stock market chart on July 28, 2025 in Chongqing, China. (Photo illustration by Cheng Xin/Getty Images)
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Fair Isaac (NYSE:FICO) stock surged by almost 18% during Thursday’s trading session after the company launched its new Mortgage Direct License Program, allowing mortgage lenders and brokers to purchase credit scores directly instead of through credit bureaus. This change eliminates the hidden fees traditionally collected by TransUnion, Equifax, and Experian, paving the way for price transparency and immediate savings. More significantly, it emphasizes how credit scoring – a critical tool in U.S. consumer finance – has been dominated for decades by just three reporting behemoths who serve as gatekeepers through a “tri-merge” system that consolidates reports and scores.

By sidelining these agencies, FICO is not only aiming for enhanced margins but also contesting a market structure that many lenders believed to be unchangeable, a strategy that could transform the flow of credit data throughout the industry. Additionally, last week FICO unveiled an AI-powered Focused Foundation Model for Financial Services aimed at the banking sector. This allows the company to provide an alternative to the expansive foundation models from companies like OpenAI, Anthropic, and Google that have gained traction across various industries. The dual announcements underscore FICO’s aim to modernize both its distribution approach and technology infrastructure. So, do these latest developments increase the appeal of FICO stock?

Does The Sell-off Make FICO stock A Compelling Buy?

If you consider the price you pay per dollar of sales or profit, FICO stock appears costly when compared to the overall market. Fair Isaac has a price-to-sales (P/S) ratio of 23.6x, in contrast to 3.3x for the S&P 500. Furthermore, it has a price-to-earnings (P/E) ratio of 75.1x compared to the benchmark’s 23.9x. Nevertheless, our examination of Fair Isaac based on key indicators of Growth, Profitability, Financial Stability, and Downturn Resilience demonstrates that the company possesses a robust operating performance and sound financial health, as outlined below. That being said, if you are looking for greater upside with lower volatility than individual stocks, the Trefis High Quality portfolio offers an alternative – having surpassed the S&P 500 while generating returns exceeding 91% since its launch.

Fair Isaac’s Revenues have experienced significant growth in recent years, with its top line increasing at an average rate of 10.9% over the last 3 years, compared to a rise of 5.4% for the S&P 500. Additionally, its quarterly revenues grew by 15.0% to $499 million in the latest quarter, an increase from $434 million a year earlier, while the S&P 500 saw a 6.1% gain. Fair Isaac’s profitability is also remarkable. Over the previous four quarters, Fair Isaac’s Net Income was $577 million, leading to a net income margin of 31.4%, significantly above the S&P 500 average of 12.6%.

This demonstrates the operating efficiency and pricing strength of its Scores segment. Fair Isaac’s balance sheet appears solid, with a Debt-to-Equity Ratio of 5.9% (compared to 20.8% for the S&P 500). Cash and cash equivalents constitute $147 million of Fair Isaac’s Total Assets of $1.8 billion. This results in a strong Cash-to-Assets Ratio of 8.0%. FICO stock has shown a performance that slightly outperformed the benchmark S&P 500 index during some recent downturns.

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The Trefis High Quality (HQ) Portfolio, consisting of 30 stocks, has a history of comfortably exceeding its benchmark, which includes all three – S&P 500, Russell, and S&P midcap – and has achieved returns surpassing 91% since its inception. What accounts for this? Collectively, HQ Portfolio stocks have delivered superior returns with lower risk compared to the benchmark index, avoiding the roller-coaster experience, as evidenced by HQ Portfolio performance metrics.

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