NEW YORK (TheStreet) -- Shares of Ocwen Financial Corp. (OCN) are down -3.38% to $25.45 as the largest non-bank mortgage servicer said investors shouldn't rely on its financial statements as the firm’s auditor reviews accounting controls, Bloomberg reports.
Ocwen shares have fallen 50% in the past 12 months,compared with a 15% gain for the 1,033-company benchmark. The company said it plans to restate results and delayed its quarterly filing for the three months ended June 30, Bloomberg said.
There may be “material weakness” in the firm’s accounting for how it booked a sale of mortgage-servicing rights to Home Loan Servicing Solutions Ltd., Ocwen said in a regulatory filing. Pretax income for 2013 probably increased by $17 million and declined by the same amount in this year’s first quarter, according to the filing.
“The company anticipates it will determine that a material weakness existed in the relevant time periods in the adequacy of our controls,” Ocwen said in the filing.
The superintendent of New York State’s Department of Financial Services is reviewing Ocwen’s arrangement with Altisource Portfolio Solutions, which he said may be designed to funnel fees to an affiliate for minimal work, Bloomberg noted. Ocwen declined to comment on Lawsky’s review earlier this month.
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 ($2.50 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 49.60%, 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. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- 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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