Investment Thesis
FICO demonstrates exceptional operational performance with a 52.9% operating margin, 35.1% net margin, and earnings growth (27.1% YoY) significantly outpacing revenue growth (15.9% YoY). The company generates robust free cash flow ($397M annually, 33% FCF margin) with 10.5x interest coverage. However, negative stockholders' equity of -$2.1B and liabilities ($4.1B) exceeding assets ($2.0B) reflect an aggressive capital structure dependent on sustained operational cash generation.
Strengths
- Exceptional profitability with 52.9% operating margin and 35.1% net margin indicating pricing power and operational efficiency
- Strong earnings growth (27.1% YoY) exceeding revenue growth, demonstrating margin expansion and operational leverage
- Excellent free cash flow generation ($397M, 33% FCF margin) with near-complete conversion of operating cash flow to free cash flow
- Adequate liquidity and debt servicing capability with 2.22x current ratio and 10.5x interest coverage ratio
Risks
- Negative stockholders' equity (-$2.1B) indicates highly leveraged balance sheet with liabilities significantly exceeding assets, limiting financial flexibility
- Total debt ($3.6B long-term) is 180% of total assets, creating vulnerability to operational disruptions or market stress
- Capital structure dependent on continuous strong cash generation with limited equity cushion; any operational deterioration would strain financial viability
- Insider activity elevated at 10 Form 4 filings in 90 days, potentially indicating trading by informed parties amid structural concerns
Key Metrics to Watch
- Operating cash flow sustainability and FCF margin maintenance (currently 33%)
- Revenue growth trajectory and operating margin stability (monitor for compression)
- Long-term debt reduction progress and interest coverage ratio sustainability
Financial Metrics
Revenue
1.2B
Net Income
422.8M
EPS (Diluted)
$17.73
Free Cash Flow
396.9M
Total Assets
2.0B
Cash
219.4M
Profitability Ratios
Gross Margin
23.3%
Operating Margin
52.9%
Net Margin
35.1%
ROE
N/A
ROA
20.6%
FCF Margin
33.0%
Balance Sheet & Liquidity
Current Ratio
2.22x
Quick Ratio
2.22x
Debt/Equity
N/A
Debt/Assets
202.6%
Interest Coverage
10.46x
Long-term Debt
3.6B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-06T13:06:23.356165 |
Data as of: 2026-03-31 |
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