TIVP041: Fair Isaac Corporation (FICO): Scoring The World’s Biggest Credit Scorer w/ Shawn O’Malley & Daniel Mahncke
The Intrinsic Value Podcast - The Investor’s Podcast Network
Modeling FICO: Price Power vs. Regulation
Shawn details valuation approach, growth scenarios, and why sustained doubling of score revenues is uncertain amid scrutiny.
Shawn O’Malley and Daniel Mahncke break down Fair Isaac Corporation (ticker: FICO), a company whose algorithms are essential to computing credit scores, which are used in everything in the U.S., from applying for a mortgage, credit cards, apartments, to even job applications and more. FICO has incredible market penetration and earnings leverage, as almost all of its price increases trickle down to the bottom line, even though the cost of credit checks is typically a very small portion of the mortgage origination process, for example.
In this episode, you’ll learn about how FICO came to dominate credit scoring in the U.S., how credit scores have made it possible for millions of people to access financing, why FICO’s industry-leading position is so rock-solid, whether FICO can still be a “compunder” going forward, and whether FICO’s stock is attractively priced, plus so much more!
IN THIS EPISODE, YOU’LL LEARN:
00:00 - Intro
15:35 - How credit scores helped to democratize access to credit
25:47 - What actually goes into a FICO score
29:08 - Why FICO has become the industry standard for credit scores
29:49 - About FICO’s relationship with the three major credit bureaus — Experian, Equifax, and TransUnion
30:19 - How the government helped solidify FICO’s moat, and whether that’s changing
55:12 - What makes FICO one of the most profitable businesses we’ve ever looked at
01:03:04 - How to think about modeling FICO’s intrinsic value
01:11:26 - Whether Shawn and Daniel add FICO to their Intrinsic Value Portfolio
*Disclaimer: Slight timestamp discrepancies may occur due to podcast platform differences.
BOOKS AND RESOURCES
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- Business Breakdowns coverage of FICO.
- Check out the Value Investors’ Club Pitch for FICO.
- FICO’s investor relations page.
- Explore our previous Intrinsic Value breakdowns: Paypal, Uber, Nike, Reddit, Amazon, Airbnb, TSMC, Alphabet, Ulta, LVMH, and Madison Square Garden Sports.
- Related books mentioned in the podcast.
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