Black Knight Financial Services, Inc.: Initiation of Research Coverage

Wednesday, September 13, 2017

William Blair & Company initiated research coverage of Black Knight Financial Services, Inc. (BKFS $43.05), a holding company that engages in the provision of integrated technology, workflow automation, and data and analytics to the mortgage industry.

Analyst Brandon Dobell estimated the company would generate adjusted earnings per share of $1.40 in 2017 and $1.62 in 2018.

“We believe Black Knight is well positioned to continue to take market share in an evolving mortgage industry,” Dobell said, “thanks to its role in loan origination and servicing and its analytics that allow for timely and effective business decisions. The processes associated with underwriting and servicing a mortgage continue to be labor-intensive and expensive. We believe that the moving tides of regulation are creating an expansive market opportunity for integrated service providers to automate and expedite much of the manual and expensive processes that underlie the loan life cycle. Black Knight Financial Services offers integrated technology solutions and workflow automation as a single source for mission-critical procedures across the entire mortgage loan life cycle, from origination to asset disposition.”

Dobell continued, “Black Knight primarily operates as a commercial software developer, characterized by high revenue visibility, EBITDA margins above 45%, significant operating leverage, and attractive capital efficiency. We expect Black Knight will continue to deploy its strong free cash flow in shareholder-friendly ways. As the U.S. mortgage industry evolves and adopts more technology, data, and analytics, we believe Black Knight will benefit from strong organic growth among its current client base, with an added layer of new client wins and new product offerings. Primary growth drivers through 2020, in our view, will be growth in first and second lien market share, bundled enterprise deals, and origination technology penetration into existing client wallets.”

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Current Ratings Distribution (as of 9/12/17)

Coverage Universe
Outperform (Buy): 63%
Market Perform (Hold): 35%
Underperform (Sell): 1% 

Inv. Banking Relationships*
Outperform (Buy): 19%
Market Perform (Hold): 8%
Underperform (Sell): 0%

* Percentage of companies in each rating category that are investment banking clients, defined as companies for which William Blair has received compensation for investment banking services within the past 12 months.

The compensation of the research analyst is based on a variety of factors, including the quality and accuracy of research, client feedback, contributions to other firm departments, competitive factors, and firm profitability.

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