Why Ocwen Financial (OCN) Stock Is Declining Today

NEW YORK (TheStreet) -- Ocwen Financial (OCN) shares are down -9.4% to $31.40 on Thursday after reporting second quarter net income of $67 million, or 48 cents per diluted share, that was 30 cents lower than analysts were expecting, on revenue of $553.1 million, that was ahead of analysts $549.4 million guidance.

"Our normalized pretax earnings were lower in the quarter as a result of significant compliance and regulatory-related costs and higher interest expense," said CEO Bill Erbey.

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TheStreet Ratings team rates OCWEN FINANCIAL CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate OCWEN FINANCIAL CORP (OCN) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 1.6%. Since the same quarter one year prior, revenues rose by 37.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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, OCWEN FINANCIAL CORP's return on equity exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for OCWEN FINANCIAL CORP is currently very high, coming in at 78.05%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 13.57% trails the industry average.
  • OCN has underperformed the S&P 500 Index, declining 20.36% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • Net operating cash flow has decreased to $213.04 million or 46.99% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: OCN Ratings Report
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Closing Bell: Ocwen Financial Loses Half Its Value; Nasdaq Sets New Record