This Stock With Outstanding Performance Has Somehow Stayed Under the Radar
There's more to this company than you think — and, by the way, it's generated double-digit shareholder returns in fourteen of the past sixteen years.
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What is the average credit score in the U.S.? As of April of this year, the average FICO score was 715. That’s a two-point decrease from the year-ago period.
FICO is also the ticker symbol for Fair Isaac Corp. The Montana-based data analytics provider is best known for generating FICO scores, the three-digit indicator of a subject’s credit risk. These scores are used to determine credit limits, approve loans, and set interest rates.
Cutting Out the Middle Man
On Thursday, shares of Fair Isaac (FICO) shot higher, gaining 18%. Barclays analyst Manav Patnaik raised his price target on the stock from $2,000 to $2,400. Needham analyst Kyle Peterson reiterated his buy rating on Fair Isaac with a target of $1,950.
Analysts and investors alike were excited to learn that Fair Isaac is changing the way it does business. Specifically, the company is going to allow lenders to obtain FICO scores directly from Fair Isaac. The new model is expected to reduce costs for mortgage lenders.
This new distribution model cuts credit bureaus like Equifax (EFX) , TransUnion (TRU), and Experian (EXPN) out of the equation. All three of those names were down sharply on Thursday’s news. Equifax lost 8.5%, TransUnion declined 10.6%, and Experian fell by 4.2%.
Solid, Consistent Performance
Fair Isaac has provided investors with positive returns every year since 2009, with just one exception (2021). The company's shares doubled in 2019, gaining 100.36%.
Despite these outstanding returns, investors now have a chance to pick up Fair Isaac well off its highs. And despite Thursday’s ferocious rally, the stock is down by 8.5% year-to-date.
Fair Isaac shares are trading above their 200-day moving average (red) for the first time since May. Thursday’s volume was the highest turnover for Fair Isaac in over two years, an indication that institutional investors are buying the stock.
The Bottom Line
Despite this outstanding performance, Fair Isaac has somehow stayed below the radar. The world of credit scores isn’t very dynamic or exciting.
However, the returns that Fair Isaac has generated for investors over the years are very exciting. Fair Isaac has provided double-digit returns for shareholders in fourteen of the past sixteen years, and the company’s new business model should be a strong positive going forward.
We are initiating a long position in the stock.
At the time of publication, Ponsi was long FICO.
