April 27, 2009 - Knight Capital Group (NITE-NASDAQ) a financial services company, provides electronic and voice access to the capital markets across multiple asset classes for buy-side, sell-side, and corporate clients.

The company was formerly known as Knight Trading Group, Inc. and changed its name to Knight Capital Group, Inc. in May 2005. Knight Capital Group was founded in 1995 and is headquartered in Jersey City, New Jersey.

There's lots of volatility in the stock's price history, stemming from the up and down nature of its earnings. In 1999, shares changed hands at $81. By 2002, you could have bought all you wanted at $3.50. Then they bounced to $15.30 in 2003 only to fall to $7.30 by 2005. Then they headed higher again, getting to $21.80 in early 2007 and plummeted to $11 late last year. Now they're trading at $15.64.

That roller coast ride was provided by earnings that hit a low of negative 9 cents a share in 2002, then went to a positive 59 cents in 2003, followed by 36 cents, then 34 cents, only to skyrocket to $1.49 in 2006, hitting $1.24 in 2007 and last year finishing the run at $1.94. This year analysts predict a total of $1.35 and $1.66 next year. First quarter earnings are estimated at 29 cents, down from 35 cents last year in the same period. Second quarter estimates are for 28 cents, down from 32 cents last year in the second period. Strap yourself in if you own this one.

What makes this stock of interest at the moment is the possibility that the capital markets have hit bottom and that stock and fixed income and options trading volume may increase as more investors want to return to the market. Of course, if the optimism fades, so will volume, and lower volume means lower sales and profits for NITE.

With the market's downturn in the last year, results of Knight's asset management business, Deephaven Capital Management Fund, have been hurt by the credit market collapse and bad investments. Knight's management decided to get out of the asset managing business and closed it down. The assets that remained went to Stark & Roth, a hedge fund in Wisconsin, along with some of the company's liabilities. Knight may receive as much as $44.7 million for the assets, but then incur expenses between $22 million and $26 million for employee severances and $13 million to $19 million for other pre-tax charges during the first half of this year. The deal should close by April 30. With that drag on earnings gone, overall profits should improve after the final write-offs are taken.

More numbers: Market Cap is $1.45 billion. Price to Book is 1.30. Operating margin is 29.14% and Profit margin is 17.31%. Revenues for the last 12 months were $1.03 billion. Total cash is $928.53 million for cash per share of $9.99. Total debt is $140 million (about 12% of capital). Current ratio is 1.51. Book Value is $11.93. There are 92.88 million shares outstanding and a float of 89.18 million. Insiders own 5.1%. There is no dividend.

With cash at almost $10 a share and a book value of $11.93, the stock seems to have fundamental appeal. And the Return on Equity is very positive. If the stock market has hit bottom and investors come back to stocks, NITE will see better volumes. But stocks may be only having a bounce, then retest the lows. Or an unexpected bad news item may hit the market, taking the wind out of its current sails. That won't be good for NITE.

Company Web site: www.knight.com

- Ted Allrich