Knight Capital Group, Inc.

Knight Capital Group, Inc. (NITE - Snapshot Report), the financial services firm, is profiting from volatility in the various trading markets. The company has surprised on estimates 3 out of the last 4 quarters by an average of 32.92%. Knight Capital is trading at 10x forward earnings.

Company Description

Knight Capital Group is a financial services firm with two business segments: Global Markets and Asset Management. The company's Global Markets division provides market access and trade execution in U.S. equities, a number of international securities, futures, options, foreign exchange and fixed income to more than 1700 buy-side firms.

The Asset Management division owns a 51% stake in international hedge fund Deephaven Holdings, with Deephaven Partners holding the other 49%.

On Jan 27, the company announced it was selling its Asset Management business to Stark & Roth for $7.3 million.

Knight Capital anticipates that it will take a $35 to $45 million pre-tax charge in 2009 as a result of the Asset Management sale.

Revenue Jumped 16% in 2008

On Jan 22, Knight Capital Group announced fourth quarter earnings that easily beat Wall Street estimates by 47.37%, or 18 cents per share. Excluding a pre-tax gain, the company earned $89.5 million, or 56 cents per share, compared to $49.6 million, or 52 cents, in the same quarter a year ago.

Revenue for the quarter rose 28% to $330.2 million from $257.5 million in the year ago period. The Global Markets segment drove revenue in the quarter as it rose 43% year-over-year. The company gained market share during the quarter and, according to industry reports, executed greater share volume than any U.S. exchange or securities firm.

Cash on Hand

Knight Capital has liquidity. As of Dec 31, 2008, the company had $440.6 million in cash and cash equivalents as well as $47.2 million invested in funds managed by Deephaven.

Share Repurchase Program

The company currently is authorized to repurchase shares under a previously announced $1 billion share repurchase program. As of the end of the fourth quarter 2008, Knight Capital had repurchased 67.1 million shares for $750.4 million. Shares may be purchased from time to time under the program.

Consensus Estimates Rise

Covering analysts are bullish on Knight Capital's future as first quarter and 2009 full year estimates are rising. First quarter estimates jumped 19.4% in the last 60 days to 43 cents a share.

2009 consensus estimates climbed 21 cents to $1.67 per share in the last 2 months.

Value Fundamentals

Knight Capital Group is a Zacks #1 Rank (strong buy) stock. It's trading with a forward P/E of 9.9. The company's price-to-book is 1.46. NITE also has a solid 5-year average return on equity (ROE) of 11.05%.