Three analysts have increased their EPS estimates in the past 30 days for this spin-off.
Black Knight, Inc. (BKI)
From Positive Patterns
Black Knight, Inc. (BKI) is a good long-term buy/hold stock. BKI is a spin-off from very successful Fidelity National (FNF). FNF has had previous success with a spin-off—(FIS). BKI starts out as a sizeable company with a market cap of about $7.1 Billion, total debt of about $1.6 Billion, and very strong/growing cash flow.
BKI provides technology/back-office services to Banks and Mortgage Companies. BKI offers solutions to help banks and mortgage companies into the tech age with automated app/tech services that save the client money during the home-loan process, and even after the deal has closed. Servicing is a big business for BKI.
Technology sales are about 82% of sales. Data analytics is small—about 18%. BKI offers services to banks/mortgage companies that run the spectrum from loan origination, through the loan process, all the way to closing. The biggest part of the BKI business is working in the servicing area (after the loan closes), especially in the foreclosure business, which has been
BKI is the only firm that offers a service that takes the client from the loan app to the closing and then to servicing, which saves lenders both time and money. Done the right way, this helps keep legal costs down.
BKI is now an independent company, and will no longer have a controlling shareholder (FNF), which will improve its business prospects. This will also result in an easier-to-understand (and operate) corporate set-up, and will simplify the balance sheet too. I believe the reason FNF spun-out BKI is because it has superior growth potential just like FIS, a previous spin-out. As Value Line also states (10/13/2017):"The stock will have increased liquidity and be eligible for index inclusion”.
This increased trading volume (averaging around 600,000 shares a day), along with the market cap ($7+ Billion), offers the liquidity that institutions need, and I believe they will come to this one, and some index/inclusion will also help spur interest.
BKI grew earnings 50% in the three years, from 2015 – 2018. I think we may see some exciting earnings gains over the next five years. BKI has a good cash flow, and consensus estimates for 2018 cash flow is $2.95. With an improving economy, earnings and cash flow could beat that number in 2018.
The stock currently sells for just a bit more than 15 times cash flow. If you think about the growth ahead (which looks exciting), it could be a real bargain. I believe BKI can grow cash flow at 15% a year (at minimum!) and it could be better than that. It could be 18-20%.
Banks are looking for ways to save money on back-office costs and avoid legal hassles. Even though BKI is a brand-new spin-off, it is already a dominator in its business, set to grow even more in the next 5-10 years.
BKI’s Loan Servicing MSP/programs (Mortgage Servicing Program) now have over 30 million clients (loans/being serviced) and it is likely that this number will show handsome growth in the future as BKI has plenty/chance to gain market share.
I think this is a good growth stock. Estimates by www.zacks.com are $1.31 this year 2017, a 19% year-over-year gain, and for 2018, the estimate is $1.61, a 17% gain.
I recommend BKI up to $51, and recommend you go slowly as I think we may be ready for a correction. I would maybe get 50% invested and let’s watch the tape. If BKI breaks out above the $50 area, we could see a handsome rally.
Bob Howard, Positive Patterns, P.O. Box 310, Turners, MO 65765, 417-887-4486, November 3, 2017