Black Knight Current Financial Leverage

BKI
 Stock
  

USD 66.21  0.85  1.30%   

Black Knight's financial leverage is the degree to which the firm utilizes its fixed-income securities and uses equity to finance projects. Companies with high leverage are usually considered to be at financial risk. Black Knight's financial risk is the risk to Black Knight stockholders that is caused by an increase in debt. In other words, with a high degree of financial leverage come high-interest payments, which usually reduce Earnings Per Share (EPS).
Continue to the analysis of Black Knight Fundamentals Over Time.
  
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Black Knight Long Term Debt to Equity is most likely to slightly decrease in the upcoming years. The last year's value of Long Term Debt to Equity was reported at 0.93

Black Current Financial Burden

Black Knight's liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Black Knight's cash, liquid assets, total liabilities, and shareholder equity can be utilized to evaluate how much leverage the company is using to sustain its current operations. For traders, higher-leverage indicators usually imply a higher risk to shareholders. In addition, it helps Black Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Black Knight's stakeholders.

Asset vs Debt

Equity vs Debt

For most companies, including Black Knight, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Black Knight the most critical issue when dealing with liquidity needs is whether the current assets are properly aligned with its current liabilities. If not, management will need to obtain alternative financing to ensure that there are always enough cash equivalents on the balance sheet in reserve to pay for obligations.
Price Book
4.0
Book Value
15.87
Operating Margin
0.22
Profit Margin
0.34
Return On Assets
0.0341
Return On Equity
0.17
Given that Black Knight's debt-to-equity ratio measures a company's obligations relative to the value of its net assets, it is usually used by traders to estimate the extent to which Black Knight is acquiring new debt as a mechanism of leveraging its assets. A high debt-to-equity ratio is generally associated with increased risk, implying that it has been aggressive in financing its growth with debt. Another way to look at debt-to-equity ratios is to compare the overall debt load of Black Knight to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Black Knight is said to be less leveraged. If creditors hold a majority of Black Knight's assets, the company is said to be highly leveraged.

Black Knight Quarterly Debt to Equity Ratio

1.408

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Given the importance of Black Knight's capital structure, the first step in the capital decision process is for the management of Black Knight to decide how much external capital it will need to raise to operate in a sustainable way. Once the amount of financing is determined, management needs to examine the financial markets to determine the terms in which the company can boost capital. This move is crucial to the process because the market environment may reduce the ability of Black Knight to issue bonds at a reasonable cost.

Black Knight Financial Leverage Rating

Black Knight bond ratings play a critical role in determining how much Black Knight have to pay to access credit markets, i.e., the amount of interest on their issued debt. The threshold between investment-grade and speculative-grade ratings has important market implications for Black Knight's borrowing costs.
Piotroski F Score
7  Strong
Beneish M Score

Black Knight Debt to Cash Allocation

As Black Knight follows its natural business cycle, the capital allocation decisions will not magically go away. Black Knight's decision-makers have to determine if most of the cash flows will be poured back into or reinvested in the business, reserved for other projects beyond operational needs, or paid back to stakeholders and investors. Many companies eventually find out that there is only so much market out there to be conquered, and adding the next product or service is only half as profitable per unit as their current endeavors. Eventually, the company will reach a point where cash flows are strong, and extra cash is available but not fully utilized. In this case, the company may start buying back its stock from the public or issue more dividends.
The company has 2.45 B in debt with debt to equity (D/E) ratio of 0.75, which is OK given its current industry classification. Black Knight has a current ratio of 1.3, demonstrating that it is in a questionable position to pay out its financial commitments when the payables are due. Debt can assist Black Knight until it has trouble settling it off, either with new capital or with free cash flow. So, Black Knight's shareholders could walk away with nothing if the company can't fulfill its legal obligations to repay debt. However, a more frequent occurrence is when companies like Black Knight sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Black to invest in growth at high rates of return. When we think about Black Knight's use of debt, we should always consider it together with cash and equity.

Black Knight Receivables Over Time

Black Knight Assets Financed by Debt

The debt-to-assets ratio shows the degree to which Black Knight uses debt to finance its assets. It includes both long-term and short-term borrowings maturing within one year. It also includes both tangible and intangible assets, such as goodwill.

Black Knight Debt Ratio

    
  39.14   
It seems as roughly 60% of Black Knight's assets are financed through equity. Typically, companies with high debt-to-asset ratios are said to be highly leveraged. The higher the ratio, the greater risk will be associated with the Black Knight's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Black Knight, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a Black Knight debt ratio should be compared their industry average or other competing firms.
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Black Knight Historical Liabilities

While analyzing the current debt level is an essential aspect of forecasting the current year budgeting needs of Black Knight, understanding its historical liability is critical in projecting Black Knight's future earnings, especially during periods of low and high inflation and deflation. Many analysts look at the trend in assets and liabilities and evaluate how Black Knight uses its financing power over time.
In order to fund their growth, businesses such as Black Knight widely use Financial Leverage. For most companies, financial capital is raised by issuing debt securities and by selling common stock. The debt and equity that make up Black Knight's capital structure have many risks and return implications. Leverage is an investment strategy of using borrowed money to increase the potential return of an investment. Please note, the concept of leverage is common in the business world. It is mostly used to boost the returns on equity capital of a company, especially when the business is unable to increase its operating efficiency and returns on total investment. Because earnings on borrowing are higher than the interest payable on debt, the company's total earnings will increase, ultimately boosting stockholders' profits.

Understaning Black Knight Use of Financial Leverage

Black Knight financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Black Knight's total debt position, including all of outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of Black Knight assets, the company is considered highly leveraged. Understanding the composition and structure of overall Black Knight debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business and if it is worth investing in it.
Last ReportedProjected for 2022
Total Debt2.4 B2.3 B
Debt Current32.5 M41.5 M
Debt Non Current2.4 B2.2 B
Issuance Repayment of Debt Securities198.6 M214.3 M
Long Term Debt to Equity 0.93  1.36 
Debt to Equity Ratio 1.47  1.44 
Black Knight, Inc. provides integrated software, data, and analytics solutions in North America and Internationally. Black Knight, Inc. was founded in 2013 and is headquartered in Jacksonville, Florida. Black Knight operates under SoftwareApplication classification in the United States and is traded on New York Stock Exchange. It employs 6400 people.
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Pair Trading with Black Knight

One of the main advantages of trading using pair correlations is that every trade hedges away some risk. Because there are two separate transactions required, even if Black Knight position performs unexpectedly, the other equity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Black Knight will appreciate offsetting losses from the drop in the long position's value.

Black Knight Pair Correlation

Correlation Analysis For Direct Indexing and Tax-loss Harvesting

The ability to find closely correlated positions to Black Knight could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Black Knight when you sell it. If you don't do this, your portfolio allocation will be skewed against your target asset allocation. So, investors can't just sell and buy back Black Knight - that would be a violation of the tax code under the "wash sale" rule, and this is why you need to find a similar enough asset and use the proceeds from selling Black Knight to buy it.
The correlation of Black Knight is a statistical measure of how it moves in relation to other equities. This measure is expressed in what is known as the correlation coefficient, which ranges between -1 and +1. A perfect positive correlation (i.e., a correlation coefficient of +1) implies that as Black Knight moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Black Knight moves in either direction, the perfectly negatively correlated security will move in the opposite direction. If the correlation is 0, the equities are not correlated; they are entirely random. A correlation greater than 0.8 is generally described as strong, whereas a correlation less than 0.5 is generally considered weak.
Correlation analysis and pair trading evaluation for Black Knight can also be used as hedging techniques within a particular sector or industry or even over random equities to generate a better risk-adjusted return on your portfolios.
Pair CorrelationCorrelation Matching
Continue to the analysis of Black Knight Fundamentals Over Time. Note that the Black Knight information on this page should be used as a complementary analysis to other Black Knight's statistical models used to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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When running Black Knight price analysis, check to measure Black Knight's market volatility, profitability, liquidity, solvency, efficiency, growth potential, financial leverage, and other vital indicators. We have many different tools that can be utilized to determine how healthy Black Knight is operating at the current time. Most of Black Knight's value examination focuses on studying past and present price action to predict the probability of Black Knight's future price movements. You can analyze the entity against its peers and financial market as a whole to determine factors that move Black Knight's price. Additionally, you may evaluate how the addition of Black Knight to your portfolios can decrease your overall portfolio volatility.
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Is Black Knight's industry expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of Black Knight. If investors know Black will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about Black Knight listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Quarterly Earnings Growth YOY
5.76
Market Capitalization
10.3 B
Quarterly Revenue Growth YOY
0.11
Return On Assets
0.0341
Return On Equity
0.17
The market value of Black Knight is measured differently than its book value, which is the value of Black that is recorded on the company's balance sheet. Investors also form their own opinion of Black Knight's value that differs from its market value or its book value, called intrinsic value, which is Black Knight's true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because Black Knight's market value can be influenced by many factors that don't directly affect Black Knight's underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between Black Knight's value and its price as these two are different measures arrived at by different means. Investors typically determine Black Knight value by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Black Knight's price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.

What is Financial Leverage?

Financial leverage is the use of borrowed money (debt) to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing. In most cases, the debt provider will limit how much risk it is ready to take and indicate a limit on the extent of the leverage it will allow. In the case of asset-backed lending, the financial provider uses the assets as collateral until the borrower repays the loan. In the case of a cash flow loan, the general creditworthiness of the company is used to back the loan. The concept of leverage is common in the business world. It is mostly used to boost the returns on equity capital of a company, especially when the business is unable to increase its operating efficiency and returns on total investment. Because earnings on borrowing are higher than the interest payable on debt, the company's total earnings will increase, ultimately boosting stockholders' profits.

Leverage and Capital Costs

The debt to equity ratio plays a role in the working average cost of capital (WACC). The overall interest on debt represents the break-even point that must be obtained to profitability in a given venture. Thus, WACC is essentially the average interest an organization owes on the capital it has borrowed for leverage. Let's say equity represents 60% of borrowed capital, and debt is 40%. This results in a financial leverage calculation of 40/60, or 0.6667. The organization owes 10% on all equity and 5% on all debt. That means that the weighted average cost of capital is (.4)(5) + (.6)(10) - or 8%. For every $10,000 borrowed, this organization will owe $800 in interest. Profit must be higher than 8% on the project to offset the cost of interest and justify this leverage.

Benefits of Financial Leverage

Leverage provides the following benefits for companies:
  • Leverage is an essential tool a company's management can use to make the best financing and investment decisions.
  • It provides a variety of financing sources by which the firm can achieve its target earnings.
  • Leverage is also an essential technique in investing as it helps companies set a threshold for the expansion of business operations. For example, it can be used to recommend restrictions on business expansion once the projected return on additional investment is lower than the cost of debt.
By borrowing funds, the firm incurs a debt that must be paid. But, this debt is paid in small installments over a relatively long period of time. This frees funds for more immediate use in the stock market. For example, suppose a company can afford a new factory but will be left with negligible free cash. In that case, it may be better to finance the factory and spend the cash on hand on inputs, labor, or even hold a significant portion as a reserve against unforeseen circumstances.

The Risk of Financial Leverage

The most obvious and apparent risk of leverage is that if price changes unexpectedly, the leveraged position can lead to severe losses. For example, imagine a hedge fund seeded by $50 worth of investor money. The hedge fund borrows another $50 and buys an asset worth $100, leading to a leverage ratio of 2:1. For the investor, this is neither good nor bad -- until the asset price changes. If the asset price goes up 10 percent, the investor earns $10 on $50 of capital, a net gain of 20 percent, and is very pleased with the increased gains from the leverage. However, if the asset price crashes unexpectedly, say by 30 percent, the investor loses $30 on $50 of capital, suffering a 60 percent loss. In other words, the effect of leverage is to increase the volatility of returns and increase the effects of a price change on the asset to the bottom line while increasing the chance for profit as well.