It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making.  But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.  Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Fair Isaac (NYSE:FICO). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

How Fast Is Fair Isaac Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes.  That makes EPS growth an attractive quality for any company.   It certainly is nice to see that Fair Isaac has managed to grow EPS by 27% per year over three years.   This has no doubt fuelled the optimism that sees the stock trading on a high multiple of earnings.  

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth.    The good news is that Fair Isaac is growing revenues, and EBIT margins improved by 2.7 percentage points to 43%, over the last year.  Both of which are great metrics to check off for potential growth.  

In the chart below, you can see how the company has grown earnings and revenue, over time.  For finer detail, click on the image.

NYSE:FICO Earnings and Revenue History May 4th 2024

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Fair Isaac's future profits.

Are Fair Isaac Insiders Aligned With All Shareholders?

Owing to the size of Fair Isaac, we wouldn't expect insiders to hold a significant proportion of the company.  But we do take comfort from the fact that they are investors in the company.     Indeed, they have a considerable amount of wealth invested in it, currently valued at US$785m.   Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.  

Does Fair Isaac Deserve A Spot On Your Watchlist?

You can't deny that Fair Isaac has grown its earnings per share at a very impressive rate. That's attractive.   Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Fair Isaac's continuing strength.  On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research.     We don't want to rain on the parade too much, but we did also find 2 warning signs for Fair Isaac that you need to be mindful of.  

Although Fair Isaac certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of  companies that not only boast of strong growth but have also seen recent insider buying..

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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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.