Influential stock columnist Gene Marcial included The Knot.com (ticker: KNOT) as one of his three picks in this weekend's Business Week. Here's a summary of his key points and a couple of quick comments:
Marcial's key points:
- Cheap stock: Marcial quotes fund manager Rob Amman of R.K. Capital who estimates that KNOT should earn $0.09 in 2005 and $0.46 in 2006. With the stock at about $7.20, that would imply that KNOT is trading at about 15.6 times 2006 earnings, which Marcial implies is cheap relative to the company's growth rate and margins.
- Revenues have grown from $24.1 million in 2001 to $41.4 million in 2004.
- Margins of 75%.
- KNOT just inked a new deal to offer products on its web site from Target, the largest wedding gift registry retailer.
- Marcial and the analyst and fund manager he quotes omit what is arguably the strongest positive about KNOT's business: it is succeeding in generating traffic to its web site without paying for ads on search engines. The company specifically commented about this on its most recent conference call. Reliance on pay-per-click ads became a clear problem for many other Internet businesses this quarter.
- The deal with Target is interesting because KNOT's merchandise sales actually fell 4% year over year last quarter, partly due to warehouse problems. Outsourcing wedding registry orders to a leading retailer could help KNOT's revenue growth.
- KNOT stock has risen 46% since it reported Q4 earnings on February 15th.
- Most recent KNOT financials here.