Black Knight Inc. (BKI) is an integrated software company that specializes in the finance industry, more specifically the mortgage and home equity loan industry. The company also provides data and analytics solutions to the industry. Black Knight is headquartered in Jacksonville, Florida, and was founded in 2013.
The company has seen earnings grow by 16% per year over the last three years. Earnings increased by 2% in the third quarter and analysts expect them to grow by 4% for the year. The outlook for 2021 shows anticipated growth of 13.6%, returning to the pre-pandemic rate of growth.
Revenue has increased at a rate of 5% per year over the last three years and it was up by 5% in Q3. Analysts expect revenue to grow by 4.2% for 2020 and they expect it to jump considerably in 2021 with anticipated growth of 14.2%.
With the housing industry booming currently, the growth forecast could be low at this point. The global health crisis has caused consumers to re-evaluate their housing preferences and the housing industry has been one of the biggest highlights in the economic recovery as a result. If the trend continues, the demand for Black Knight’s products should continue to grow and could even accelerate.
In addition to the earnings and revenue growth, the company’s management efficiency measurements are pretty solid as well. The profit margin is well above average at 38.7% while the return on equity is at 16%.
The current valuations for the stock are a little high, but not terribly high. The trailing P/E is 61.5 and the forward P/E is 41.3. With the age of the company and the growth status, these ratios aren’t out of the ordinary, but they are probably too high for value-oriented investors.
Current Consolidation Looks Similar to One over the Summer
Since the market bottomed in March, Black Knight has nearly doubled. The stock hit a low of $50.01 in March and reached a recent high of $97.19. The rally really took part in two phases. The stock moved higher for 10 straight weeks before going through a consolidation that lasted seven weeks. It then started a second rally where the stock gained ground in 12 out of 13 weeks. The stock has now been consolidating for the last six weeks.
Looking at the overbought/oversold indicators, we see that the 10-week RSI has moved down below the 60 level and it was down around 55 back in July before turning higher. The weekly stochastic indicators were in overbought territory but have just dropped below the 80 level. They dropped down to the low 60s before reversing higher in July.
Personally, I watch the 13-week and 52-week moving averages because they represent one quarter and one year of data. The more conventional moving averages that investors watch are the 20-week and the 50-week. The consolidation in July hit a low at the 20-week moving average. The 20-week is at $85.13 currently, so the stock would need to drop another 6.5% in order to reach that potential support level.
Traditional Sentiment Indicators for Black Knight are Neutral
When I look at the traditional sentiment indicators for Black Knight, they all show neutral readings. There are 14 analysts covering the stock with 10 “buy” ratings and four “hold” ratings. This gives us a buy percentage of 71.4% and that falls right in the average range.
The short interest ratio for Black Knight is 3.2. The average ratio is right around the 3.0 level. The short interest did rise from 2.04 million shares to 2.16 million shares in the first half of November.
The put/call ratio is at 1.14. There are 948 puts open and 834 calls at this time. Those are pretty low and the total open interest only represents 178,200 shares. Meanwhile, the average daily trading volume is 676K. The ratio itself is in the average range compared to other stocks, but the ratio fell sharply after the October options expired. The ratio was above 3.0 for a good part of September.
In the title of this article, I stated that Black Knight is flying below the radar and that it is underfollowed and undercovered. I based that on the fact that there are only 5.64K followers on Seeking Alpha and there has only been one article written about the company on here in the past year.
Black Knight hit my radar because it meets some basic fundamental criteria. I use Investor’s Business Daily’s EPS ratings and SMR ratings to get a quick snapshot of the fundamental picture so that I can then follow the chart and look for patterns. It also alerts me to look at the fundamentals more closely. For Black Knight, the EPS rating is 87 and the SMR rating is an A. This puts it in the top 20th percentile for these categories based on earnings growth, sales growth, profit margin, and return on equity.
My Overall Take on Black Knight
There is a lot to like about Black Knight. The fundamentals are good, especially the profit margin, the earnings growth, and the 2021 expectations for earnings and revenue growth.
On the charts, I like how the current pattern is setting up and how it looks similar to the consolidation the stock went through over the summer. The sentiment indicators are average, but I like the fact that the stock doesn’t seem to be getting noticed much. I know Seeking Alpha isn’t the only investment website, but it tends to be a pretty good barometer for what is going on with regard to how investors view a stock. The fact that Black Knight isn’t getting attention is a good thing because it means the sentiment isn’t too bullish.
I will probably wait for the weekly stochastic indicators to make a bullish crossover because such occurrences in the past have been a good sign for the stock. I can see the stock starting its next move higher within the next few weeks.
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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.