FICO down 70% on mortgage-credit-score competition and a 15% staff cut; if rivals take share, margins likely shrink. But switching is slow/risky, so if its moat holds partly, it may have fallen too far. Returns and 15 times free cash flow support a middle-case value near 1,021, green only on middle/high assumptions.

Second, payments and credit scoring like PayPal, which is down 82% and FICO, which is down 70%, spooked by new competition.

And now, the most dramatic one of all, FICO, Fair Isaac, down about 70%. Guys, you probably know its famous credit score. That's the number lenders use to decide whether you get a loan and at what rate.

For decades, FICO scoring business was a money printing machine with profit margins around 90%. Because nearly every mortgage in America required a FICO score. It was one of the best businesses on the planet.

So why the sudden collapse in stock price? Well, guys, the rules just changed. The government opened the door for a rival called Vantage Score to compete in the mortgage market.

And one huge lender, Rocket Mortgage, already said it's switching to it.

FICO even announced it's cutting 15% of its workforce. That's the bare case, and it is a serious one.

So, if the real competition starts to take away more market share, those sky-high margins will likely shrink. But what's the bull case? Well, swapping out the credit score baked into an entire industry is a slow, risky, and complicated process.

FICO is trusted, and it's deeply wired into how lending works.

And guys, if a competitor shows up, FICO has those high margins. All they need to do is probably lower their price a bit and they'd still make a lot of money. So if its moat even holds up partly, this stock may have fallen way too far.

So let's analyze it. So guys, here is FICO. It is a 15.5 billion company with $21.5 billion enterprise value. So that's $6 billion is essentially their debt. And they made a billion dollars in free cash flow last year.

What's amazing is look at their 5year average, 650. So they made a lot more free cash flow last year. It was a big jump. I'm going to want to figure out why that is.

Let's go to our cash flow statement and see if there's an immediate reason that jumps out at me, guys. It just looks like their net income just jumped up a lot. Let's see if there's any one-time things to their net income.

I mean, things look like it was just legitimate, maybe.

All right, guys. Look at these returns on capital. 50% for the last five years, 71% a year for the last year. It's selling for 15 times free cash flow, 19 times earnings. It's got growing profit margin, 10-year profit margin of 26%, fiveyear of 30%, one year of 34, and then their gross profit margin of 85%.

And guys, look at these look at these revenue growth numbers. 10% a year for the last 10 years, 12% a year for the last five, 17% for the last three. All right, let's go check out the eight pillars.

So, this is what we like seeing. We see six check marks buying back shares and the only X's are the five-year PE and 5-year price of free cash flow.

Now remember, just because there's an X there, does not mean it's overvalued. If they can grow their profit and free cash flow at a very high rate of return, high growth rate, these could be nothing.

If they're going to grow their profit, let's say 30% a year for 10 years, let's go to an extreme. Those are cheap.

The question is, how much can they grow their profit? Well, that's the bare case we're asking about. Are these competitors going to allow them to grow their profit or will it impede their profit growth? That's the question we're asking.

Let's take a look at analysts and what they think. Well, analysts think their profit's going to grow 21,8 and 10% for the next three years. That's a lot of growth, guys.

The stock's currently at uh $650 a share. At $83 a share times 20 is $1,700 stock. another potential triple from these levels if they actually hit these numbers. And revenue growth 12 and a half, nine and a half, four and a half percent.

So, let's go to our stock analyzer tool and run the numbers. So, guys, our 10-year analysis, I originally did 6, 9, and 12% revenue growth. I'm actually going to de I'm actually going to decrease this a little bit. I'm going to go four, seven, and 10%.

Next, I'm going to focus on their free cash flow here because it's higher than their profit margin. and I did 33, 38, and 43%. So again, I'm going to zero out the profit margin.

Now, the PE and price of free cash flow, high returns on capital. Yes, they have competition, but they're still the dominant score. I'm still putting 18, 22, and 26 for my PE ratio and my price to free cash flow 10 years from now. And then finally, my 9.5% return.

Hit the analyze button. Scroll down. All right, guys. So I have a low price of 618, a high price of$,650, a middle price of 1,021. So guys, for me, yes, this is still green on the middle and high assumptions, but it's not like the other ones where there was like green all the way across, which I love the most.