Title: Fair Isaac: A 114-page Deep Dive Show: Compounding Quality (Substack, paid post — compoundingquality.net) Guest: Pieter Slegers / Team Compounding Quality (author of the summary and the verdict); the underlying 114-page investment case was written by "Compound with René" and shared with Compounding Quality Date: 2026-05-21 URL: https://www.compoundingquality.net/p/fair-isaac-a-114-page-deep-dive Length: written post — no timestamps Note: Paid-subscriber post captured via Stephen's logged-in session. Body text verbatim; UI chrome removed. Investor-presentation panels noted inline as [Image — ...]. GUEST-AUTHORED SOURCE MATERIAL: the 114-page investment case is by Compound with René; the summary, the Quality Score and the buy/no-buy decision at the end are Compounding Quality's own. The 15-metric Quality Score table is published as an image; the article states the resulting Total Quality Score of 7.8/10 in text and the per-metric grid was not retrievable from the paid post.
Hi Partner
Today, you will receive a full investment case of 114 (!) pages about Fair Isaac Corporation
This is a wonderful company that definitely deserves your attention.
Compound with René
This investment case was made by Compound with René.
He was so kind to share the investment case with us.
You can check out his work here: Compound with René
Fair Isaac Corporation - General Information
Company name: Fair Isaac Corporation ISIN: US3032501047 Ticker: FICO Type: Oligopoly Stock Price: $1,230.0 Market cap: $28.5 billion Average daily volume: $457.9 million
How does Fair Isaac make money?
Fair Isaac (FICO) makes money mainly by charging lenders, banks, and credit bureaus fees every time they pull a FICO credit score to evaluate someone for a loan, credit card, or mortgage. It also earns revenue by selling software and analytics tools that businesses use to make decisions about fraud detection, lending, and customer management.
This is a very extensive report.
In case you don't have time to read it all right now, let's give you the highlights first.
Three main takeaways
Here are the 3 most important takeaways:
1. Industry Standard Scores
FICO scores are used in 90% of U.S. lending decisions and over 95% of all mortgage-backed securities. [Image — Source: Investor Presentation]
2. Strong Margins
FICO has strong structural advantages that give them the highest margins in the industry. [Image — Source: Investor Presentation]
3. FICO is a Cannibal Stock
Because FICO is so profitable, they return quite some capital to shareholders through buybacks. [Image — Source: Investor Presentation]
Conclusion investment case
René wrote a 114-page deep dive about FICO. Let's summarize it for you.
FICO is one of the best compounding machines in history.
They operate a simple, capital-light business.
The company licenses its credit scoring technology to lenders and credit bureaus.
Every time a mortgage, auto loan, or credit card application is processed, FICO earns a small fee.
This makes FICO a tollbooth on the U.S. financial system.
The business benefits from:
High switching costs
Institutional inertia
Decades of trust
FICO scores are deeply embedded in underwriting systems and the U.S. financial system.
The company is also very profitable.
The company has strong margins, high returns on capital, and has reduced its share count by 30% over the past decade.
While the opportunities are attractive, there are also concerns.
Competition from VantageScore
Regulatory pressure
Advances in AI could disrupt their business model
Management has responded through FICO 10T, direct licensing initiatives, and investments in its cloud platform.
Onepager
Here are the basics of Fair Isaac Corporation (click on the picture to expand):
[Image — Fair Isaac onepager]
Quality Score
Every company gets a Quality Score based on 15 metrics.
Finally, the company gets a 'Total Quality Score' which is calculated by taking the sum of the score of all 15 metrics and dividing it by 15.
As you can see in the table below Fair Isaac Corporation gets a Total Quality Score of 7.8/10.
[Table image — the 15-metric Quality Score grid. Total Quality Score: 7.8/10. Per-metric scores not retrievable from the paid post.]
Full Investment Case
You can download the full investment case here: Investment case Fair Isaac Corporation
Are we buying?
So are we buying FICO? Is it worth a spot in Our Portfolio?
Here's the short answer...
No. We are not buying FICO at this point in time for Our Portfolio.
There are two main reasons:
Fair Isaac is facing more and more competition. Especially from Vantagescore. As a result, it's uncertain whether Fair Isaac can keep its monopoly going forward (AI could make it easier for VantageScore to become succesful).
Fair Isaac uses a very high level of Stock-Based Compensation. SBC as a % of Net Income equals 22% (!). FICO currently trades at a FWD PE of 25.2x. But if you take into account Stock-Based Comp, the actual valuation level is 30.7x
We keep following up on FICO very closely.
It could be added to the Portfolio one day.
I wrote this in the update of Our Shopping List a few weeks ago:
At which price are we interested?
FICO is an amazing business. The company now trades near its cheapest valuation level of the past 10 years (Forward PE: 25.2x).
However, we should take the high level of stock-based compensation into account.
If we adjust for SBCs, FICO trades at a FWD PE of 30.7x.
We would love to own FICO at a FWD PE of 25.0x (after SBC). This implies a stock price of $901 (current stock price: $1.230).
Compound with René
This investment case was made by Compound with René.
He was so kind to share the investment case with us.
You can check out his work here: Compound with René
Everything in life compounds Team Compounding Quality