Intrinsic value of Fair Isaac Corporation - FICO

Previous Close

$306.20

  Intrinsic Value

$119.43

stock screener

  Rating & Target

str. sell

-61%

Previous close

$306.20

 
Intrinsic value

$119.43

 
Up/down potential

-61%

 
Rating

str. sell

We calculate the intrinsic value of FICO stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 8.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  12.90
  12.11
  11.40
  10.76
  10.18
  9.66
  9.20
  8.78
  8.40
  8.06
  7.75
  7.48
  7.23
  7.01
  6.81
  6.63
  6.46
  6.32
  6.19
  6.07
  5.96
  5.86
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
  5.37
Revenue, $m
  1,165
  1,306
  1,455
  1,612
  1,776
  1,947
  2,127
  2,313
  2,508
  2,710
  2,920
  3,138
  3,365
  3,601
  3,846
  4,101
  4,366
  4,642
  4,929
  5,228
  5,540
  5,865
  6,203
  6,557
  6,926
  7,312
  7,715
  8,136
  8,576
  9,037
Variable operating expenses, $m
  819
  908
  1,003
  1,102
  1,206
  1,314
  1,428
  1,546
  1,669
  1,797
  1,848
  1,987
  2,130
  2,280
  2,435
  2,596
  2,764
  2,938
  3,120
  3,309
  3,507
  3,712
  3,927
  4,151
  4,384
  4,629
  4,884
  5,150
  5,429
  5,721
Fixed operating expenses, $m
  95
  97
  99
  101
  104
  106
  108
  111
  113
  116
  118
  121
  123
  126
  129
  132
  135
  138
  141
  144
  147
  150
  153
  157
  160
  164
  167
  171
  175
  179
Total operating expenses, $m
  914
  1,005
  1,102
  1,203
  1,310
  1,420
  1,536
  1,657
  1,782
  1,913
  1,966
  2,108
  2,253
  2,406
  2,564
  2,728
  2,899
  3,076
  3,261
  3,453
  3,654
  3,862
  4,080
  4,308
  4,544
  4,793
  5,051
  5,321
  5,604
  5,900
Operating income, $m
  251
  301
  353
  408
  466
  527
  591
  657
  726
  797
  953
  1,031
  1,112
  1,195
  1,283
  1,373
  1,468
  1,566
  1,668
  1,775
  1,886
  2,002
  2,123
  2,249
  2,381
  2,519
  2,664
  2,815
  2,972
  3,138
EBITDA, $m
  350
  402
  457
  515
  575
  639
  705
  774
  846
  920
  998
  1,079
  1,163
  1,251
  1,342
  1,436
  1,535
  1,637
  1,744
  1,855
  1,971
  2,092
  2,218
  2,350
  2,488
  2,632
  2,782
  2,940
  3,104
  3,277
Interest expense (income), $m
  26
  41
  48
  56
  64
  73
  82
  91
  101
  111
  122
  133
  144
  156
  169
  181
  195
  209
  223
  238
  254
  270
  287
  305
  323
  343
  363
  384
  406
  429
  453
Earnings before tax, $m
  210
  252
  297
  344
  394
  445
  499
  556
  614
  676
  821
  887
  955
  1,027
  1,101
  1,178
  1,259
  1,343
  1,430
  1,521
  1,616
  1,715
  1,818
  1,926
  2,039
  2,157
  2,280
  2,409
  2,544
  2,685
Tax expense, $m
  57
  68
  80
  93
  106
  120
  135
  150
  166
  182
  222
  239
  258
  277
  297
  318
  340
  363
  386
  411
  436
  463
  491
  520
  550
  582
  616
  650
  687
  725
Net income, $m
  153
  184
  217
  251
  287
  325
  365
  406
  449
  493
  599
  647
  697
  750
  804
  860
  919
  980
  1,044
  1,110
  1,180
  1,252
  1,327
  1,406
  1,488
  1,574
  1,664
  1,758
  1,857
  1,960

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,501
  1,683
  1,875
  2,077
  2,288
  2,510
  2,740
  2,981
  3,231
  3,492
  3,763
  4,044
  4,337
  4,640
  4,956
  5,285
  5,626
  5,982
  6,352
  6,737
  7,139
  7,557
  7,994
  8,450
  8,925
  9,422
  9,942
  10,484
  11,052
  11,646
Adjusted assets (=assets-cash), $m
  1,501
  1,683
  1,875
  2,077
  2,288
  2,510
  2,740
  2,981
  3,231
  3,492
  3,763
  4,044
  4,337
  4,640
  4,956
  5,285
  5,626
  5,982
  6,352
  6,737
  7,139
  7,557
  7,994
  8,450
  8,925
  9,422
  9,942
  10,484
  11,052
  11,646
Revenue / Adjusted assets
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
Average production assets, $m
  514
  576
  642
  711
  783
  859
  938
  1,020
  1,106
  1,195
  1,288
  1,384
  1,484
  1,588
  1,696
  1,809
  1,925
  2,047
  2,174
  2,306
  2,443
  2,586
  2,736
  2,892
  3,054
  3,224
  3,402
  3,588
  3,782
  3,985
Working capital, $m
  76
  85
  95
  105
  115
  127
  138
  150
  163
  176
  190
  204
  219
  234
  250
  267
  284
  302
  320
  340
  360
  381
  403
  426
  450
  475
  501
  529
  557
  587
Total debt, $m
  898
  1,041
  1,191
  1,349
  1,515
  1,688
  1,869
  2,058
  2,254
  2,459
  2,671
  2,891
  3,121
  3,359
  3,607
  3,864
  4,132
  4,411
  4,701
  5,003
  5,318
  5,646
  5,988
  6,345
  6,718
  7,108
  7,515
  7,941
  8,386
  8,851
Total liabilities, $m
  1,177
  1,320
  1,470
  1,628
  1,794
  1,968
  2,148
  2,337
  2,533
  2,738
  2,950
  3,171
  3,400
  3,638
  3,886
  4,143
  4,411
  4,690
  4,980
  5,282
  5,597
  5,925
  6,267
  6,625
  6,998
  7,387
  7,794
  8,220
  8,665
  9,130
Total equity, $m
  324
  364
  405
  449
  494
  542
  592
  644
  698
  754
  813
  874
  937
  1,002
  1,071
  1,142
  1,215
  1,292
  1,372
  1,455
  1,542
  1,632
  1,727
  1,825
  1,928
  2,035
  2,147
  2,265
  2,387
  2,515
Total liabilities and equity, $m
  1,501
  1,684
  1,875
  2,077
  2,288
  2,510
  2,740
  2,981
  3,231
  3,492
  3,763
  4,045
  4,337
  4,640
  4,957
  5,285
  5,626
  5,982
  6,352
  6,737
  7,139
  7,557
  7,994
  8,450
  8,926
  9,422
  9,941
  10,485
  11,052
  11,645
Debt-to-equity ratio
  2.770
  2.860
  2.940
  3.010
  3.070
  3.110
  3.160
  3.200
  3.230
  3.260
  3.290
  3.310
  3.330
  3.350
  3.370
  3.390
  3.400
  3.410
  3.430
  3.440
  3.450
  3.460
  3.470
  3.480
  3.480
  3.490
  3.500
  3.510
  3.510
  3.520
Adjusted equity ratio
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  153
  184
  217
  251
  287
  325
  365
  406
  449
  493
  599
  647
  697
  750
  804
  860
  919
  980
  1,044
  1,110
  1,180
  1,252
  1,327
  1,406
  1,488
  1,574
  1,664
  1,758
  1,857
  1,960
Depreciation, amort., depletion, $m
  99
  102
  104
  106
  109
  111
  114
  117
  120
  123
  45
  48
  52
  55
  59
  63
  67
  71
  76
  80
  85
  90
  95
  101
  106
  112
  119
  125
  132
  139
Funds from operations, $m
  253
  286
  321
  358
  396
  437
  479
  523
  569
  616
  644
  695
  749
  805
  863
  923
  986
  1,052
  1,120
  1,191
  1,265
  1,342
  1,423
  1,507
  1,595
  1,687
  1,783
  1,883
  1,989
  2,099
Change in working capital, $m
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
Cash from operations, $m
  244
  277
  311
  347
  385
  425
  467
  511
  556
  603
  630
  681
  734
  790
  847
  907
  969
  1,034
  1,101
  1,171
  1,244
  1,321
  1,401
  1,484
  1,571
  1,662
  1,757
  1,856
  1,960
  2,069
Maintenance CAPEX, $m
  -16
  -18
  -20
  -22
  -25
  -27
  -30
  -33
  -36
  -39
  -42
  -45
  -48
  -52
  -55
  -59
  -63
  -67
  -71
  -76
  -80
  -85
  -90
  -95
  -101
  -106
  -112
  -119
  -125
  -132
New CAPEX, $m
  -59
  -62
  -66
  -69
  -72
  -76
  -79
  -82
  -86
  -89
  -93
  -96
  -100
  -104
  -108
  -112
  -117
  -122
  -127
  -132
  -137
  -143
  -149
  -156
  -163
  -170
  -178
  -186
  -194
  -203
Cash from investing activities, $m
  -75
  -80
  -86
  -91
  -97
  -103
  -109
  -115
  -122
  -128
  -135
  -141
  -148
  -156
  -163
  -171
  -180
  -189
  -198
  -208
  -217
  -228
  -239
  -251
  -264
  -276
  -290
  -305
  -319
  -335
Free cash flow, $m
  169
  196
  225
  256
  288
  322
  358
  396
  435
  475
  496
  540
  586
  634
  684
  735
  789
  845
  903
  964
  1,027
  1,092
  1,161
  1,233
  1,307
  1,385
  1,467
  1,552
  1,641
  1,734
Issuance/(repayment) of debt, $m
  134
  143
  150
  158
  166
  173
  181
  189
  196
  204
  212
  221
  229
  238
  248
  257
  268
  279
  290
  302
  315
  328
  342
  357
  373
  390
  407
  426
  445
  465
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  134
  143
  150
  158
  166
  173
  181
  189
  196
  204
  212
  221
  229
  238
  248
  257
  268
  279
  290
  302
  315
  328
  342
  357
  373
  390
  407
  426
  445
  465
Total cash flow (excl. dividends), $m
  303
  339
  376
  414
  454
  496
  539
  584
  631
  680
  708
  761
  815
  872
  931
  993
  1,057
  1,124
  1,193
  1,266
  1,342
  1,421
  1,503
  1,590
  1,680
  1,775
  1,874
  1,977
  2,086
  2,199
Retained Cash Flow (-), $m
  -37
  -39
  -41
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -61
  -63
  -66
  -68
  -71
  -74
  -77
  -80
  -83
  -87
  -90
  -94
  -98
  -103
  -107
  -112
  -117
  -123
  -128
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  266
  300
  334
  371
  408
  448
  489
  532
  577
  623
  650
  700
  752
  806
  863
  922
  983
  1,047
  1,113
  1,182
  1,255
  1,330
  1,409
  1,491
  1,577
  1,667
  1,762
  1,860
  1,963
  2,071
Discount rate, %
  7.80
  8.19
  8.60
  9.03
  9.48
  9.95
  10.45
  10.98
  11.52
  12.10
  12.71
  13.34
  14.01
  14.71
  15.44
  16.22
  17.03
  17.88
  18.77
  19.71
  20.70
  21.73
  22.82
  23.96
  25.16
  26.41
  27.73
  29.12
  30.58
  32.11
PV of cash for distribution, $m
  247
  256
  261
  262
  260
  254
  244
  231
  216
  199
  174
  156
  137
  118
  100
  83
  68
  54
  42
  32
  24
  18
  12
  9
  6
  4
  2
  1
  1
  0
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Fair Isaac Corporation (FICO) is a provider of analytic, software and data management products and services that enable businesses to automate and connect decisions. The Company operates through three segments: Applications, Scores and Decision Management Software. The Applications segment includes pre-configured decision management applications designed for a specific type of business problem or process, such as marketing, account origination, customer management, fraud, collections and insurance claims management. The Scores segment includes business-to-business scoring solutions and services, business-to-consumer scoring solutions and services, including myFICO solutions for consumers. The Decision Management Software segment consists of analytic and decision management software tools that clients can use to create their own custom decision management applications, its new FICO Decision Management Suite, as well as associated professional services.

FINANCIAL RATIOS  of  Fair Isaac Corporation (FICO)

Valuation Ratios
P/E Ratio 72.3
Price to Sales 9.9
Price to Book 21.7
Price to Tangible Book
Price to Cash Flow 41
Price to Free Cash Flow 44.9
Growth Rates
Sales Growth Rate 5.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -9.1%
Cap. Spend. - 3 Yr. Gr. Rate 9%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 108.4%
Total Debt to Equity 141.7%
Interest Coverage 7
Management Effectiveness
Return On Assets 12.1%
Ret/ On Assets - 3 Yr. Avg. 10.6%
Return On Total Capital 12.5%
Ret/ On T. Cap. - 3 Yr. Avg. 10.5%
Return On Equity 29.3%
Return On Equity - 3 Yr. Avg. 24.5%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 69.2%
Gross Margin - 3 Yr. Avg. 68.9%
EBITDA Margin 22.9%
EBITDA Margin - 3 Yr. Avg. 22.2%
Operating Margin 19%
Oper. Margin - 3 Yr. Avg. 18.2%
Pre-Tax Margin 16.2%
Pre-Tax Margin - 3 Yr. Avg. 15.2%
Net Profit Margin 13.7%
Net Profit Margin - 3 Yr. Avg. 12.2%
Effective Tax Rate 15.2%
Eff/ Tax Rate - 3 Yr. Avg. 20.1%
Payout Ratio 0.8%

FICO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FICO stock intrinsic value calculation we used $1032 million for the last fiscal year's total revenue generated by Fair Isaac Corporation. The default revenue input number comes from 0001 income statement of Fair Isaac Corporation. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our FICO stock valuation model: a) initial revenue growth rate of 12.9% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 7.8%, whose default value for FICO is calculated based on our internal credit rating of Fair Isaac Corporation, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Fair Isaac Corporation.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of FICO stock the variable cost ratio is equal to 71.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $93 million in the base year in the intrinsic value calculation for FICO stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Fair Isaac Corporation.

Corporate tax rate of 27% is the nominal tax rate for Fair Isaac Corporation. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the FICO stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for FICO are equal to 44.1%.

Life of production assets of 28.7 years is the average useful life of capital assets used in Fair Isaac Corporation operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for FICO is equal to 6.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $287.437 million for Fair Isaac Corporation - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 29.083 million for Fair Isaac Corporation is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Fair Isaac Corporation at the current share price and the inputted number of shares is $8.9 billion.

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