Not Now For The Knot (KNOT)

| About: XO Group (XOXO)

The Knot Inc. (KNOT) provides services to the wedding market, mostly online. The stock has run like a scalded dog from last summer's low of under $6 to $18 recently.

The company now trades for over eight times sales.

A look at 2005 revenue by quarter does not reveal much that could be viewed as spectacular. Revenue in Q1 was $11.9 million, Q2 was $13.6 million, Q3 was $13.3 million and Q4 was $12.8 million. According to the Motley Fool, The Knot earned $.06 a share in the December quarter which was 50% better than what Wall Street expected.

A look at the company 10-K shows that The Knot is being sued by a company called The issue is a patent violation claim. The amount being sought could be as high as $13 million.

Another issue that investors should consider is that if the publishing empire Conde Nast, which dominates the wedding magazine business, even decides to build a large online business in this market, things could get tough over at The Knot.

This is a good business with a clever approach to a large market--getting married. But, the stock is too high now, given the risks.

KNOT 1-yr Chart

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was also president of when it was the 10th most visited site on the internet, according to MediaMetrix. He has been on the boards of and Edgar Online. He does not own securities in companies he writes about.