Fair Isaac: Raising Our Fair Value Estimate by 20%; Shares Still Seem Pricey

After updating our model on Fair Isaac, we are increasing our fair value estimate on the firm’s shares to $970 from $810 primarily as we are increasing our pricing assumptions in the firm’s business-to-business scores segment as well as our out-year profit growth forecasts. Revenue growth from scores has very high incremental margins and as such, pricing changes almost entirely flow to Fair Isaac’s bottom line. With wide-moat Fair Isaac’s shares trading at roughly $1,270 per share, we believe the firm’s current valuation does not leave enough room for error.