CoBF post in July 2021...
A short update:
1. This company is essentially profitable since late 2019.
2. All the regulatory issues that plagued them since 2014 are gone. The problems were mostly related to the old OCN platform that the company transitioned out of with the 2018 acquisition of PHH. The PHH Black Knight servicing platform has had zero regulatory issues.
3. The recent deal with Oaktree is going to catapult the earnings potential from around 10% ROE run rate currently to 20-25% ROE in two years.
4. The company is growing again, and fast.
5. Leverage is actually pretty low for a financial company - debt is about equal to equity. It only seems more levered because the reverse mortgage secularizations are on the balance sheet as well.
5. Given the above current valuation is completely out of whack - 0.6 price/book. For a growing company with a potential for 20%+ ROE, it should be at least 2 (and a P/E of 10 as a result) which is still cheap. That implies a share value of 100$ vs 27$ currently, and it might be 150$ if they deliver on the growth.