Martin Zweig's Growth Investor Model Identifies FAIR ISAAC CORP (FICO) as a Top Pick

FAIR ISAAC CORP (FICO) is a large-cap growth stock in the Software & Programming industry. It rates highest using Martin Zweig's Growth Investor model with a score of 77% based on its underlying fundamentals and valuation. The stock passes tests for sales growth rate, current quarter earnings, quarterly earnings one year ago, positive earnings growth rate for the current quarter, earnings growth rate for the past several quarters, EPS growth for the current quarter, and long-term EPS growth. However, it fails tests for P/E ratio, revenue growth in relation to EPS growth, total debt/equity ratio.

Fair Isaac Corporation (FICO) stock has experienced a significant decline, plunging over 20% since the Federal Housing Finance Agency (FHFA) announced its decision to allow mortgage lenders to use alternative credit reports. This policy shift has had a dramatic impact on FICO, which has long enjoyed a virtual monopoly in U.S. mortgage lending due to its exclusive use of FICO reports by Fannie Mae and Freddie Mac [1].

FICO's stock, which closed at $1,869 on July 7, dropped to $1,565 the following day after the FHFA's announcement. Since then, the share price has continued to trend downward, hitting a year-low of $1,471 on July 15 before rebounding slightly to the low $1,500 range [1]. The primary reason for this drop is the potential loss of market share to alternative credit scoring systems, notably VantageScore.

VantageScore, developed by the credit reporting agencies Experian, Equifax, and TransUnion, factors in on-time rent payments into an applicant's credit score, unlike the traditional FICO scoring system. This shift could benefit consumers and make the mortgage application process more inclusive by considering a broader range of financial data [1].

Goldman Sachs has reiterated its Buy rating on FICO, maintaining a $1,915.00 price target despite the recent decline. The investment bank cited FICO's strong financial health and pricing power as reasons for its optimism [2]. FICO executives have stated that they do not expect a significant market share shift to VantageScore, expressing confidence in the continued use of Classic FICO scores by lenders [2].

FICO's recent earnings report also provides some reassurance to investors. The company reported a non-GAAP earnings per share of $8.57 for Q3 2025, surpassing expectations. Additionally, revenue reached $536 million, exceeding forecasts [2]. However, the stock's performance remains volatile due to the uncertainty surrounding the FHFA's policy change and the potential impact on FICO's market position.

Investors should closely monitor FICO's ability to adapt to the new regulatory environment and maintain its market dominance. The company's strategy to preserve its economics through alternative pricing models and direct-to-lender initiatives will be crucial in navigating this transition [2].

References:
[1] https://finance.yahoo.com/news/fico-stock-plunged-over-20-223117306.html
[2] https://za.investing.com/news/analyst-ratings/goldman-sachs-reiterates-buy-rating-on-fair-isaac-stock-citing-mortgage-strategy-93CH-3819443