Why Ocwen Financial (OCN) Stock Is Declining Today

NEW YORK (TheStreet) -- Shares of Ocwen Financial Corp.  (OCN) are down -3.07% to $26.83 as New York's Department of Financial Services examines whether the company may have funneled as much as $65 million to an affiliated company, overcharging struggling homeowners on insurance, Reuters reports. 

Investigators are looking into the mortgage servicing company's new contracts that provide force-placed insurance with Southwest Business Corp, an agent that was recommended by Altisource Portfolio Solutions SA  (ASPS), an Ocwen affiliate, Reuters added.

Insurance agencies affiliated with mortgage servicing companies have an incentive to purchase force-placed insurance with high premiums to push borrowers into foreclosure, Reuters noted. 

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Separately, 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. Among the primary strengths of the company is its respectable return on equity which we feel is likely to continue. At the same time, however, we also find weaknesses including unimpressive growth in net income and a generally disappointing performance in the stock itself."

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

  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. 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.
  • OCWEN FINANCIAL CORP's earnings per share declined by 9.4% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, OCWEN FINANCIAL CORP increased its bottom line by earning $2.02 versus $1.30 in the prior year. This year, the market expects an improvement in earnings ($3.31 versus $2.02).
  • Looking at the price performance of OCN's shares over the past 12 months, there is not much good news to report: the stock is down 36.65%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Thrifts & Mortgage Finance industry average. The net income has decreased by 12.7% when compared to the same quarter one year ago, dropping from $76.72 million to $66.96 million.
  • You can view the full analysis from the report here: OCN Ratings Report

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