Has Fair Isaac’s 8% Monthly Gain Changed the Valuation Outlook for 2025?

If you have been on the fence about Fair Isaac’s stock, you are not alone. After a dramatic run in recent years, the share price has cooled off, and investors are asking if this is simply a pause or a signal of something deeper. The last week saw a 3.2% climb, and the past month was even more impressive with an 8.0% jump. But let’s not forget, Fair Isaac is still down a hefty 16.5% year-to-date and 16.6% over the past twelve months. That said, those who have been holding longer term have enjoyed spectacular gains: over 240% in three years, and more than 325% in five. The company continues to draw attention as it sharpens its focus on analytics and software, and investor sentiment seems to track every strategic announcement.

Recent developments in Fair Isaac’s partnerships and ongoing innovation in credit scoring have kept the stock in the spotlight, fueling optimism about long-term prospects. However, its current value score stands at 2 out of 6, signaling that the stock screens as undervalued under only a couple of standard metrics. With this backdrop, let’s break down what these valuation approaches are telling us. Later, we will dig into a perspective that gives even more insight into Fair Isaac’s true worth.

Fair Isaac scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Fair Isaac Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's value by projecting its future cash flows and discounting them back to today’s dollars. This approach is a favorite among long-term investors who want to understand the fundamental value underlying the stock price.

For Fair Isaac, the latest reported Free Cash Flow (FCF) stands at $772 million. Analysts anticipate solid growth, with projections reaching $1.66 billion by 2029. While direct analyst estimates usually look only five years ahead, longer-term forecasts are extrapolated from prevailing trends and business momentum. Over the next decade, the company’s cash flow is expected to steadily increase, reflecting its strong position in analytics and software.

Based on these projections, the DCF fair value for Fair Isaac shares is calculated at $1,268 per share. In comparison to the current market price, this suggests the stock is trading about 31.4% above its estimated intrinsic value. According to this cash flow-based approach, the shares appear overvalued.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Fair Isaac.

Our Discounted Cash Flow (DCF) analysis suggests Fair Isaac may be overvalued by 31.4%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Fair Isaac Price vs Earnings (PE Ratio)

The Price-to-Earnings (PE) ratio is often the preferred valuation metric for companies like Fair Isaac that are consistently profitable. It allows investors to put the company’s earnings into context with its current market price to help gauge whether the stock appears cheap, expensive, or fair relative to its earnings power.

It is important to remember that a "normal" or "fair" PE ratio varies based on a company’s growth prospects and risk profile. Higher growth rates usually justify higher PE ratios, while added risks often lower what investors are willing to pay for each dollar of earnings.

Fair Isaac’s current PE ratio stands at 63.3x. This is close to the average for its peer group at 63.9x, but it sits well above the broader Software industry average of 33.3x. However, headline comparisons can sometimes be misleading, especially for companies with unique growth profiles or market-leading positions.

This is where the Simply Wall St “Fair Ratio” comes in. Calculated with a proprietary model, the Fair Ratio (in this case, 42.3x) takes into account not just Fair Isaac’s growth rate, but also its risk, profit margins, size, and specific industry landscape. This makes it a more holistic benchmark than a simple peer or industry average.

When comparing Fair Isaac’s actual PE ratio of 63.3x to its Fair Ratio of 42.3x, it becomes clear that the stock is trading well above what would be considered a fair multiple given its fundamentals. This suggests the stock may be overvalued at present.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Fair Isaac Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is your personalized investment story, combining your view of a company’s prospects, like Fair Isaac, with your own assumptions about its future revenue, earnings, margins, and fair value. Rather than just crunching numbers, Narratives connect the “why” behind your viewpoint and automatically link your story to real financial forecasts, giving you a more dynamic estimate of what the company is actually worth today.

On Simply Wall St’s Community page, millions of investors use Narratives as an easy and accessible tool to create and test their perspectives. By building your Narrative, you can compare your calculated Fair Value with the current market price, providing clear guidance on when to consider buying or selling.

What makes Narratives especially powerful is that they update dynamically. If news breaks or earnings beat (or miss) expectations, your Narrative reflects those changes instantly. For example, right now the most optimistic Narrative values Fair Isaac shares above $2,300, based on strong global cloud momentum, while the most cautious view sees fair value closer to $1,230, citing regulatory risks and slower software growth. This range reflects how different stories and expectations can lead to dramatically different conclusions about the company’s true worth.

Do you think there's more to the story for Fair Isaac? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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