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Investors Who Bought Black Knight (NYSE:BKI) Shares Three Years Ago Are Now Up 69%

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Simply Wall St
·3 min read
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While Black Knight, Inc. (NYSE:BKI) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 14% in the last quarter. In contrast the stock has done reasonably well over three years. After all, the stock has performed better than the market (64%) over that time, over which it gained 69%.

See our latest analysis for Black Knight

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the three years of share price growth, Black Knight actually saw its earnings per share (EPS) drop 5.4% per year.

So we doubt that the market is looking to EPS for its main judge of the company's value. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

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 image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth
earnings-and-revenue-growth

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

Black Knight shareholders are up 5.5% for the year. Unfortunately this falls short of the market return of around 31%. At least the longer term returns (running at about 19% a year, are better. We prefer focus on longer term returns, as they are usually a more meaningful indication of the underlying business. It's always interesting to track share price performance over the longer term. But to understand Black Knight better, we need to consider many other factors. For example, we've discovered 2 warning signs for Black Knight (1 is significant!) that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.