Today we're going to take a look at the well-established Fair Isaac Corporation (NYSE:FICO). The company's stock saw significant share price movement during recent months on the NYSE, rising to highs of US$2,382 and falling to the lows of US$1,900. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Fair Isaac's current trading price of US$2,037 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Fair Isaac's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Fair Isaac Still Cheap?
The stock is currently trading at US$2,037 on the share market, which means it is overvalued by 22% compared to our intrinsic value of $1666.51. This means that the opportunity to buy Fair Isaac at a good price has disappeared! But, is there another opportunity to buy low in the future? Given that Fair Isaac's share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Fair Isaac generate?
Future outlook is an important aspect when you're looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let's also take a look at the company's future expectations. With profit expected to grow by 91% over the next couple of years, the future seems bright for Fair Isaac. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? It seems like the market has well and truly priced in FICO's positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe FICO should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you've been keeping tabs on FICO for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there's no upside from mispricing. However, the optimistic prospect is encouraging for FICO, which means it's worth diving deeper into other factors in order to take advantage of the next price drop.
So while earnings quality is important, it's equally important to consider the risks facing Fair Isaac at this point in time. Case in point: We've spotted 2 warning signs for Fair Isaac you should be aware of.
If you are no longer interested in Fair Isaac, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
