Awesome Ocwen

NEW YORK (TheStreet) -- Shareholders are a pain to some CEOs. Always asking for profits and returns for their stake in the company.

Some CEOs resent that. They want time -- usually two years -- to show what geniuses they have really been for the last five years despite their seemingly dismal results.

Patience, they plead.

Forbes magazine summed up the attitude well earlier this year when one of its columnists, Keld Jensen, said if he ever became a CEO, he would send out the following letter:

"I don't care what the share value will be for the next two years. We might not make a profit during this period. But we are going to focus all our resources on product research and development with the goal to create the best product the world has ever seen. We're here to change the world!"

I'm sure Jensen is a very nice person and he probably likes puppy dogs. But if I ever see his name on the masthead of a company I happen to own -- however small my piece -- I am going to sell straight away.

As a shareholder, the only world I want a manager to change is mine -- the owner.

If a CEO wants to work in an environment where he can do anything he wants and no one will notice for two years, I suggest he get a job running the Department of Energy.

Until then, I like companies with CEOs who remember who runs the company and who owns it and how never the twain shall meet.

Google ( GOOG) is one place with a lot of folks who scorn the 'let's make money for the shareholders' idea. The share price shows it. Same with Wal-Mart ( WMT): It used to be on a mission to charge low prices to create high profits. Then, six years ago, someone decided they needed to start squeezing the carbon out of Wal-Mart's supply chain. They also squeezed out profits.

At Ocwen Financial ( OCN), you won't find any executives talking such silly stuff. The share price shows it, too. So much so, OCN is today the #1 rated stock in my Best Stocks Now app.

I have owned and talked about Ocwen many times over the last several years. Ocwen provides residential and commercial mortgage loans servicing as well as asset management services. OCN has been growing its earnings over the last five years by 35% per year.

Data from Best Stocks Now AppPerformance

Over the last 10 years, OCN has delivered 35% per year while the market has delivered 5% to investors. Over the last five years, OCN has delivered 67% per year while the market has delivered 6%. Over the last three years, OCN has delivered 82% per year while the market has delivered only 15% during the same time. Over the last 12 months, OCN is up 117% with the market up 18%.

Who has been putting his name on this stock for years? That's right -- you can google my name and find all of the articles I have written and the radio minutes I have recorded about OCN. You can even take a look at my newsletter and see where the stock has been in my portfolios overtime.

Even better, you could download and subscribe to my app, The Best Stocks Now and find all material I've produced on OCN since 2011.

If you do it, it's not bragging. OCN has great performance in earnings and profits and sales. And that is all about management knowing it has to take care of business for its customers - and shareholders.

Today, I give the company a performance and momentum grade of A+!

Valuation: But what about value? OCN is currently trading at ten times forward earnings. It is expected to grow those earnings by 25% per year over the next five years. OCN also has a very favorable PEG ratio of 0.39.

Data from Best Stocks Now App

Now we need to apply an appropriate multiple to those earnings to project a five-year target price. This is the hardest part of the equation. There are no set rules to go by here. Instead, we must weigh the following factors in determining the multiple:
  • The current forward average PE ratio of the 3,600 stocks that I track is 18.4
  • The current forward PE ratio of OCN is 9.81.

Next I apply a very conservative multiple towards the potential future earnings of the shares. When I do this I get a five-year target price of $105 per share. The stock passes both my valuation and performance tests.

Stock chart: Is it too much to ask that a stock have a good chart on top of good performance and valuation? This is my final test. I want the best management, the best performance. I want to buy the stock at a reasonable price. Lastly, I want a good, healthy stock chart. This is all I ask.

The problem is, these requirements really narrows down the pickings. In fact, they narrow them down to only about 220 stocks out of the almost 3,600 stocks I follow.

So for all these people looking for stocks in companies that do not seek to relentlessly improve profits and shareholder value: Good news: You have a lot to choose from -- the other 3,380 stocks that do not get my top ratings.

Courtesy of StockCharts.com

Take a look at OCN's one year chart -- OCN has been in an uptrend as it recently broke out of a sideways trend. It's also currently hitting new, all-time highs.

OCN was a $2 stock in 2008 and it is a $56 stock today, and I think it can go higher. It is a stock that I own at Gunderson Capital Management and I fully expect to own it two years from now as well.

Data from Best Stocks Now App

At the time of publication the author had a position in OCN.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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