Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model NEW YORK ( TheStreet) -- Knight Capital Group (NYSE: KCG) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.
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- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Capital Markets industry. The net income has significantly decreased by 81.3% when compared to the same quarter one year ago, falling from $17.57 million to $3.29 million.
- The gross profit margin for KNIGHT CAPITAL GROUP INC is currently extremely low, coming in at 8.20%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.20% significantly trails the industry average.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 77.68%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 78.94% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- KNIGHT CAPITAL GROUP INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, KNIGHT CAPITAL GROUP INC increased its bottom line by earning $1.24 versus $0.98 in the prior year. For the next year, the market is expecting a contraction of 161.3% in earnings (-$0.76 versus $1.24).
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Capital Markets industry and the overall market, KNIGHT CAPITAL GROUP INC's return on equity is below that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff