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The financial software industry group has had a good run since the 2008 financial crisis, but has paused in recent months. It might be setting the stage for another advance, led by several stocks, most conspicuously Ellie Mae ( ELLI ). The group ranked No. 58 out of 197 in Friday’s IBD, hardly high enough to warrant special notice, except that five of the 15 companies in the group have a Composite Rating to the north side of 90, putting them in the top 10% of the universe of U.S. stocks, based on a variety of proprietary IBD measurements. Ellie Mae hit a new high Thursday, showing plenty of signs of institutional buying as evidenced by a high Accumulation/Distribution Rating. It has a Composite Rating of 98. The company offers its customers — who include mortgage companies, credit unions and banks — a unified platform, called Encompass, designed to streamline the origination and underwriting of loans in an efficient way. Since the company came public in 2011, mortgage writing has been essentially flat. But the company has managed to grow earnings and revenue at an impressive rate as more players in the mortgage market use its tools. It claims that 1,700 out of 8,000 participants are its customers, including seven of the top 25. But growth might be starting to slow. Earnings per share in the most recent report, although blowing away estimates, was just 16% higher than a year earlier, and analysts are expecting a 6% decline in the next report. Another company with ties to the mortgage business, at least partly, is Fair Isaac ( FICO ), which is known for producing the FICO scores that gauge consumers’ creditworthiness. More broadly, the company provides analytics software to help manage risk and fight fraud. The company says that 2.5 billion credit cards globally use Fair Isaac’s FICO anti-fraud systems. Shares of Fair Isaac hit a new high Friday, and the stock also shows signs of institutional buying. It’s extended from any buy point and has been on a run since reporting better-than-expected earnings Jan. 29. The stock was up 16% the next day. Earnings have been growing at a steady rate the last few years, but revenue growth is mostly a single-digit affair. Analysts are forecasting a 25% decline this year, but a 25% increase in 2017. The Composite Rating is 95. Another leader in the group is software publisher Intuit ( INTU ), which makes the familiar Quicken software for personal finances, QuickBooks for small businesses and TurboTax for tax preparation. It’s benefiting from users migrating to the cloud. It says that online customers have grown from 21 million to 29 million over the past three years while desktop customers have declined from 9 million to 8 million. The stock had a bad break last August in reaction to an earnings report and is basing as it recovers from that. Image provided by Shutterstock . Scalper1 News
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