FICO is a slow growth company priced at 30x PE? What am I missing?
u/Delicious_Invite_127 ·
Reddit — r/ValueInvesting
· August 07, 2026 at 07:52
· ⬆ 15 pts
· 💬 18 comments
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Summary
The author argues FICO’s revenue growth has been slow (~9% CAGR) while earnings growth was boosted mainly by fee increases, pushing margins to record highs.
At ~30x PE, the author sees limited upside and believes FICO is fairly valued or possibly overpriced.
The author prefers MSFT as a faster-growing large-cap alternative over FICO.
Quality assessment: Light DD / speculation — valid high-level valuation concerns, but lacks deep analysis of FICO’s competitive moat and pricing power durability.
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So FICO compounded revenue by 9% from 2020 to 2025, But net income compounded by 22% because they kept raising their fees.
Increasing fees is not a sustainable way to grow income and their margins is already at an all time high of 30%. They will have to increase revenue but they have historically grew revenue at a slow rate relative to their valuation. I don't see that slow revenue growth changing anytime soon.
So isn't FICO fairly value at best and even possibly overpriced? Am I missing anything? I think it's smarter to buy MSFT instead since they seem to increase revenue even faster than a medium cap company like FICO.
FICO revenue growth is only ~9% CAGR, while net income grew ~22% mainly through fee hikes and record 30% margins. Fee-driven growth is not a sustainable long-term engine, so a 30x PE leaves little margin of safety. Avoid FICO at current valuation until revenue growth accelerates or price becomes more attractive. FICO’s data/moat and pricing power could sustain earnings growth longer than the author assumes.
The author believes MSFT grows revenue faster than FICO despite being a much larger company. Faster revenue growth makes MSFT a better compounder relative to FICO at similar quality levels. Prefer MSFT over FICO as the better large-cap growth-at-reasonable-price idea. MSFT is also priced at a premium multiple; any AI/cloud slowdown could pressure growth.
This Reddit post, published August 07, 2026,
features u/Delicious_Invite_127
discussing FICO, MSFT.
2 trade ideas extracted by AI with direction and confidence scoring.