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Non-Tech : Knight/Trimark Group, Inc. -- Ignore unavailable to you. Want to Upgrade?

To: GS_Wall Street who wrote (2726)	7/23/1999 5:18:00 AM
From: Herschel Rubin	Read Replies (1) \| Respond to of 10027

The following REUTERS article appears to be slanted against NITE. After all, why shouldn't it be... Reuters owns Instinet. If any one article can make a stellar earnings report seem muted, this article seems to do so quite well: biz.yahoo.com Compare with stats provided by NITE: biz.yahoo.com Interestingly Reuters chose to focus on VOLUME GROWTH (not earnings growth) in their first paragraph which gives the non-discerning reader the impression that NITE's earnings will only grow 5-10% qtr-over-qtr. From the Reuters article: ''If you look at first quarter versus fourth quarter, we grew over 50 percent in volume. That is not a realistic intermediate-term growth rate,'' Pasternak told Reuters in a telephone interview. ''The growth rates we're seeing now -- we might grow 5 to 10 percent quarter-over-quarter -- are much more reasonable." -------- A 5-10% volume growth does NOT translate into a 5-10% qtr-over-qtr EARNINGS GROWTH, so the casual reader need not jump to that conclusion. NITE's earnings growth is a multiple of its volume growth. In spite of the opening paragraphs, the article goes on to admit that NITE grew earnings 34% qtr-over-qtr (against a 15% q-over-q volume increase): "The firm on Wednesday said its second-quarter profits jumped to a record $50.2 million, up from $11.7 million in the year-ago quarter and up 34 percent from $37.4 million in the first quarter." From NITE's earnings press release: there was a 15% increase in trading volume, which translated into a 23% increase in revenues, which translated into a 34% quarterly sequential increase in earnings. In summary, a 10% qtr-over-qtr volume increase would logically translate into a 22.6% qtr-over-qtr earnings increase (34%/15% X 10%), which, when compounded for 4 quarters equals a 126% annual earnings growth rate. Nothing to sneeze at. If these calculations are correct, NITE should support a PE of 120ish, or a share price of (120 PE) X (1.06 trailing earnings) = $127/share. Kinda high, but realistic if a company can show a consistent 120% annual earnings growth. The problem is the market is not yet convinced NITE can do so.