Black Knight, Inc. (NYSE:BKI) shareholders might be concerned after seeing the share price drop 15% in the last quarter. In contrast the stock is up over the last three years. In that time, it is up 57%, which isn’t bad, but not amazing either.
To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Over the last three years, Black Knight failed to grow earnings per share, which fell 5.4% (annualized).
So we doubt that the market is looking to EPS for its main judge of the company’s value. Therefore, we think it’s worth considering other metrics as well.
It could be that the revenue growth of 5.1% per year is viewed as evidence that Black Knight is growing. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder’s faith in better days ahead will be rewarded.
The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It’s good to see that there was some significant insider buying in the last three months. That’s a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. So it makes a lot of sense to check out what analysts think Black Knight will earn in the future (free profit forecasts).
A Different Perspective
Over the last year Black Knight shareholders have received a TSR of 18%. Unfortunately this falls short of the market return of around 58%. On the bright side that gain is actually better than the average return of 16% over the last three years, implying that the company is doing better recently. If the business can justify the share price gain with improving fundamental data, then there could be more gains to come. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we’ve discovered 3 warning signs for Black Knight (2 are significant!) that you should be aware of before investing here.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
This article by Simply Wall St is general in nature. 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.
