Episode Details

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,⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠

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