Ocwen Financial Corporation (OCN) Shows Signs Of Being Water-Logged And Getting Wetter

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Ocwen Financial Corporation ( OCN) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Ocwen Financial Corporation as such a stock due to the following factors:

  • OCN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $87.7 million.
  • OCN has traded 1.6 million shares today.
  • OCN traded in a range 210.3% of the normal price range with a price range of $2.69.
  • OCN traded below its daily resistance level (quality: 75 days, meaning that the stock is crossing a resistance level set by the last 75 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on OCN:

Ocwen Financial Corporation, through its subsidiaries, engages in the servicing and origination of mortgage loans in the United States and internationally. OCN has a PE ratio of 28.7. Currently there are 6 analysts that rate Ocwen Financial Corporation a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Ocwen Financial Corporation has been 1.9 million shares per day over the past 30 days. Ocwen Financial has a market cap of $6.8 billion and is part of the financial sector and banking industry. The stock has a beta of 0.40 and a short float of 2.5% with 1.58 days to cover. Shares are down 9% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Ocwen Financial Corporation as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, expanding profit margins, solid stock price performance and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • OCN's very impressive revenue growth exceeded the industry average of 106.4%. Since the same quarter one year prior, revenues leaped by 129.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • OCWEN FINANCIAL CORP has improved earnings per share by 18.9% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, OCWEN FINANCIAL CORP increased its bottom line by earning $1.30 versus $0.73 in the prior year. This year, the market expects an improvement in earnings ($2.04 versus $1.30).
  • The gross profit margin for OCWEN FINANCIAL CORP is currently very high, coming in at 79.29%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, OCN's net profit margin of 12.61% significantly trails the industry average.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 32.71% over the past year, a rise that has exceeded that of the S&P 500 Index. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Thrifts & Mortgage Finance industry and the overall market on the basis of return on equity, OCWEN FINANCIAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

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Closing Bell: Ocwen Financial Loses Half Its Value; Nasdaq Sets New Record