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Fair Isaac's (NYSE:FICO) five-year earnings growth trails the 29% YoY shareholder returns

·3 min read

When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, you can make far more than 100% on a really good stock. One great example is Fair Isaac Corporation (NYSE:FICO) which saw its share price drive 256% higher over five years. It's also good to see the share price up 42% over the last quarter. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

Check out our latest analysis for Fair Isaac

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Over half a decade, Fair Isaac managed to grow its earnings per share at 30% a year. This EPS growth is remarkably close to the 29% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. In fact, the share price seems to largely reflect the EPS growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
earnings-per-share-growth

We know that Fair Isaac has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Fair Isaac's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's nice to see that Fair Isaac shareholders have received a total shareholder return of 8.9% over the last year. However, that falls short of the 29% TSR per annum it has made for shareholders, each year, over five years. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Fair Isaac has 1 warning sign we think you should be aware of.

But note: Fair Isaac may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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.

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