Ocwen Financial Corp. (NYSE: OCN) is
a diversified financial services holding company with headquarters in West Palm
Beach, Florida and operations in Canada, China, Germany, India, Japan and
Taiwan. Ocwen is engaged in a variety of businesses related to
residential and commercial mortgage servicing, real estate asset management,
asset recovery, business process outsourcing and the marketing and sales of
technology solutions to third parties.
The Stock's price gained 18.9% over the past 3 months; 34.2% over the past 6
months; and 74.4% over the past 12 months.
Ocwen is classified as a small-cap company.
The Company's market capitalization: $817.97 million. The Stock is rated to
significantly outperform the market over the next six months. The Company
was formed in February 1988.
Ocwen's corporate
headquarters are located West Palm Beach, Florida. Approximately 3,120 people are
employed by
Ocwen.
Sector: Financial; Industry: S&Ls\ Savings Banks ; Ticker:
OCN; Exch:
NYSE;
07/21/06 Closing Price: $12.91)
STOCK GRADE (ASG): 54.90 (VERY
GOOD!)
BUSINESS & FINANCIAL SUMMARY
(Yahoo)
EXPANDED BUSINESS DESCRIPTION
(Reuters)
STOCK INFO/RESEARCH
(MSN)
OWNERSHIP
(MSN)
KEY DEVELOPMENTS
(MSN),
RECENT NEWS
(MSN) &
HEADLINES (Yahoo)
HISTORICAL PRICES (Yahoo)
&
PRICE CHART
(IQChart)
COMPANY'S WEB SITE
STOCK'S CORE
STRENGTHS (SEE: Table Below)
| Management's Effectiveness (12 Mo.) | . . . | Return on Equity: | 5.98% |
| Profitability (12 Mo.) | . . . | Profit Margin: | 82.64% |
| Stock's Growth Record (12 Mo.) | . . . | Revenue: | 6.60% |
| . . . | EPS: | -60.24% | |
| . . . | Price: | 82.35% | |
| . . . | Dividend: | NA | |
| PE & EPS (12 Mo.) | . . . | Price/Earnings: | 39.24 |
| . . . | Earnings/Share: | 0.33 | |
| Price / Share (Closing) | . . . | 07/21/2006: | $12.91 |
OCWEN FINANCIAL CORPORATION -
EVALUATION
Ocwen's
stock emerged as an ACE'S selection based on the evaluation results of the
criteria listed below. The evaluation results are encapsulated as one value in
ASG (short for ACE'S Stock Grade). ASG
is a proprietary variable that was devised by ACE'S to measure the
quality of a stock for investment. Ocwen's ASG value of 54.90 is
VERY GOOD.
A. MANAGEMENTS EFFECTIVENESS - POOR (BELOW INDUSTRY
AVERAGE)
B. PRODUCTS & SERVICES, SET OF - GOOD
C. SALES - EXCELLENT
D. CASH FLOW, FREE -
POOR
E. PROFITABILITY - GOOD
F. PRICE-EARNINGS RATIO (P/E) - POOR (HIGHER THAN
INDUSTRY'S AVERAGE)
G.
FINANCIAL HEALTH -
GOOD (LOWER THAN INDUSTRY'S AVERAGE).
H.
MARKET CAPITALIZATION -
EXCELLENT
I.
TRADED VOLUME -
AVERAGE
J.
PRICE GROWTH - EXCELLENT
A. MANAGEMENTS EFFECTIVENESS - POOR (BELOW INDUSTRY
AVERAGE)
How well a company performs
generally - in its
business operations, controlling costs, the success of its products and
services in the market place, profitability, and the like - depends on its
management's efficiency. Return on Equity ( ROE) is used by ACE'S as a general indication
of the company's efficiency.
Ocwen's ROE (ttm) of 6.0% is lower (by 52.75%) than the Industry's ROE of
12.7%; and lower (by 72.97%) than the S&P 500's ROE of 22.2%.
(Ref.:
MSN Finance\Key Ratios).
ACE'S gives a preferential rating to a company that has a
comparable or relatively higher ROE than the Industry. ACE'S rating of
Ocwen's Management's Effectiveness: POOR (BELOW INDUSTRY AVERAGE).
^ Back to Evaluation
B. PRODUCTS & SERVICES -
GOOD
Products and services are the elements that enables a company to have a presence
in its target market and generate sales. The set of products and services that a company has and how successful those products and services performs in the
target market are very important factors in considering a company's stock for
investment.
Ocwen's :core businesses: Residential Loan Servicing, Ocwen Technology
Xchange ("OTX"), Ocwen Realty Advisors ("ORA"), Ocwen Recovery Group, Business
Process Outsourcing, and Commercial Servicing; and non-core businesses:
Commercial Assets, Affordable Housing, and Subprime Finance.
RESIDENTIAL LOAN SERVICING
Servicing of performing, sub-performing and non-performing residential mortgage
loans. Subprime mortgages comprised the vast majority of the total unpaid
principal balance of the loans serviced at December 31, 2004. Loans are serviced
under servicing agreements for clients. These clients include well capitalized
mortgage originators, such as New Century and Delta Funding, Wall Street firms
with mortgage securitization platforms, such as Lehman Brothers, Credit Suisse
First Boston and Morgan Stanley, and governmental agencies, such as the United
States Department of Veterans Affairs.
OCWEN TECHNOLOGY XCHANGE ("OTX")
OTX consists of the following three product lines: REALTrans(SM),
REALServicing(TM) and REALSynergy(TM). Each of these product lines serves a
different market need, and each is at a different stage of maturity and
commercial use.
The REALTrans product is a web-based vendor management platform that facilitates
the electronic fulfillment of real estate products and services necessary to
process, approve and close residential mortgage loans, as well as to service
them. The REALServicing product is a comprehensive enterprise-level residential
mortgage loan servicing platform. The REALSynergy product is a comprehensive
enterprise-level commercial mortgage loan servicing platform.
OCWEN REALTY ADVISORS ("ORA")
ORA provides valuation services to external customers in the wholesale lending
community as well as for Ocwen's own residential real estate transactions.
OCWEN RECOVERY GROUP
This segment conducts collection activities for third party owners of unsecured
receivables and for a portfolio of unsecured credit card receivables that we
acquired at a discount in 1999 and 2000.
BUSINESS PROCESS OUTSOURCING
Provides outsourcing services to third parties, including
mortgage underwriting, data entry, call center services and mortgage research.
COMMERCIAL SERVICING
This segment includes the results of operations of both domestic and international servicing. International servicing is conducted through Global Servicing Solutions, LLC ("GSS"), a joint servicing venture formed with Merrill Lynch in March 2002 for the servicing of assets in various countries. Prior to 2004, domestic commercial servicing was reported as a component of the Commercial Finance segment (re-named Commercial Assets), and the results of international operations were reported as a separate segment.
NON-CORE BUSINESSES
Composed of the following segments: Commercial Assets, Affordable Housing and
Subprime Finance. Commercial Assets are activities which includes both discount
loans and originated loans as well as investments in commercial real estate.
Affordable Housing are investments in affordable housing properties primarily
through limited partnerships for the purpose of obtaining Federal income tax
credits. Beginning in 2000, Ocwen ceased making investments in these properties.
Subprime Finance are engagement in subprime residential loan origination prior
to ceasing originations in August of 1999.
ACE'S
gives a preferential rating to a company who have
a variety of product
and services that have present and continued utility in a broad and
dynamic market.
An estimation of the latter products' utility, distinctive qualities and competitiveness would be subjective assessments.
However, there is one objective data that indicates how well the subjective
elements of Ocwen's products and services
are assessed and used by its target market - the company's
sales.
ACE'S rating of
Ocwen's line-up of Products & Services: GOOD
^ Back to Evaluation
C. SALES - EXCELLENT
Sales is an important indicator on how a company's products and services
performs in its target market. Generally, a high sales figure is preferred than a lower figure.
Also, a steady and appreciable growth in a company's total sales from one year to the next is a key indicator on how a
company is able (or unable) to sustain and improve the utility of its products and services in the marketplace.
Ocwen's annual revenue was $164.33M in 12/2001, $115.49M in 12/2002, $162.90M in 12/2003,
$216.34M in 12/2004 and $239.65M in 12/2005. Relative to 12/2001, the
Company's sales decreased 29.72%% in 2002 and 0.87% in2003; increased 31.65% in 2004 and
45.83% in 2005,
ACE'S gives a preferential rating to a company that have demonstrated the ability to
sustain a high and progressively increasing level of sales from year-to-year. Ocwen's
year-to-year annual revenues declined from 2001 to 2003; and have have progressively increased
from 2003 to 2005. In terms of sales
volume, the Companies past 12 month revenues was 11.89% less than the Industry.
In terms of growth rate,
Ocwen's rate is higher than the Industry by 157.20% points. ACE'S rating of
Ocwen's Sales Growth Rate: EXCELLENT.^ Back to Evaluation
D. CASH FLOW, FREE -
POOR
Cash flow is crucial to the operation and survival of companies. A company
having ample ready cash ensures that creditors, employees, and others can be
paid on time.
Cash flow could be considered as a better measure of a business's profitability
than earnings, because a company can show positive net earnings and have insufficient cash flow (that is, the company
is not able to pay its debts). Cash Flow
thus can be used as an indicator of a company's financial strength.
Ocwen's cash flow during the past 5 years: $260.66M in 12/2001;
$192.25M in 12/2002; $229.93M in 12/2003; $287.85M in 12/2004; and (N.A.) in
12/2005. Relative to 12/2001, the Company's cash flow decreased 26.24% in
2002 and 11.78% in2003; and increased 10.43% in 2004.
ACE'S
gives a preferential rating to a company that have demonstrated the ability to
sustain a positive and appreciable cash flow from year-to-year. Ocwen's
year-to-year cash flow decreased in 2002 and 2003; and increased in 2004. Ocwen's
cash flow increased by an average of -9.20% from 2001 to 2004. ACE'S rating of
Ocwen's Cash Flow: POOR.^ Back to Evaluation
E. PROFITABILITY - GOOD
Making a profit is the ultimate goal of every company. A useful gauge of a
company's profitability is its net income (also referred to as "earnings"). Related to a company's outstanding shares of common stocks, the company's total earnings is transformed
to "earnings per share" (or "EPS" for short). EPS is a very popular indicator of a company's profitability and a
powerful variable that influences the price of a company's stock.
Ocwen's annual Net Income, for the past 12 months, of $20.9M is
266.67% higher than the
Industry's Income of $5.70M). For the past 5 years, Ocwen's annual Net Income are:
-$124.78M
in 12/2001; -$68.78M in 12/2002; $4.77M in 12/2003; $57.72M in 12/2004; and $20.86M in
12/2005. Relative to 12/2001, the Company's net income increased 44.87%
in 2002, 103.82% in2003, 146.26% in 2004 and 116.72% in 2005. In terms of growth,
Ocwen's Net Income have grown
592.60%
during the past 12 months, and the Industry's was 6.80%).
(Refs.
MSN Money\Financials\Statements;
MSN Money\Wizard)
ACE'S gives a preferential rating to a company that have demonstrated the ability to
sustain a positive, appreciable and increasing net income. Ocwen's
year-to-year annual Net Income growth rate - from 2001 to 2005 - have been appreciable with an average
rate of 102.92% annually. In terms
of income growth rate. ACE'S rating of
Ocwens Profitability: GOOD.
F. PRICE-EARNINGS RATIO (P/E) - POOR (HIGHER THAN INDUSTRY'S AVERAGE)
A stock's Price-Earnings ratio tells us roughly how much investors are willing
to pay per dollar of earnings. Price-Earnings
is a ratio of a company's current share price compared to its per-share
earnings. The P/E ratio is a much better indicator
of the value of a stock than the market price alone.
In general, a high P/E means high projected earnings in the future. As such, the
P/E ratio could be interpreted as the reflection of the market's optimism concerning a firm's growth prospects. To
determine whether a particular P/E is high
or low, take into account a company's growth rates; and the P/Es of other
companies in the same industry. Historically,
the average P/E ratio in the market has been around 15-25.
Ocwen has a P/E ratio of 30.66 (ttm) which is
12.50
points higher - or 68.83% greater -
than the
Industry's P/E of 18.16 (ttm).
(Ref.: Yahoo! Finance\Competitors)
ACE'S gives a preferential rating to a company that has a
comparable or relatively lower P/E than the Industry. ACE'S rating of
Ocwen's P/E Ratio: POOR (HIGHER THAN INDUSTRY'S AVERAGE).
^ Back to Evaluation
G. FINANCIAL HEALTH -
GOOD (LOWER THAN INDUSTRY'S AVERAGE).
The assumption of debt, i.e., financial leverage, are used by companies to
finance its assets. The magnitude of the debt's expense component affects the company's net income.
A company with significantly more debt than equity is considered to be highly
leveraged. A popular measure of financial
leverage is the "debt/equity ratio". A higher debt/equity
ratio generally means that a company has been aggressive in financing its growth
with debt. This higher ratio can result
in volatile or negative earnings as a result of the additional interest expense.
Thus, the Debt/Equity Ratio is popularly used
as a measure of a company's financial health.
Ocwen's 1.52 Debt/Equity Ratio (latest 12 months) is 29.30% less than
the Industry's Ratio of 2.15, and 46.15% more than the S&P 500's Ratio 1.04.
.
ACE'S gives a preferential rating to a company that has a
comparable or relatively lower debt ratio than the Industry. ACE'S rating of
Ocwen's
Debt Ratio: GOOD (LOWER THAN INDUSTRY'S AVERAGE).^ Back to Evaluation
H. MARKET CAPITALIZATION - EXCELLENT
Market Capitalization (or market cap for short) is a measure of a company's
size. The market cap provides a broad gauge
of the growth-versus-risk potential of a company. Historically, large caps have
experienced slower growth with lower
risk; whereas small caps have experienced higher growth potential, but with
higher risk.
The market cap of a company is calculated by multiplying the number of its
outstanding shares by the shares' current market price. There are presently six classes of Market Cap: Mega Cap, Big/Large
Cap, Mid Cap, Small Cap, Micro Cap and Nano Cap. ACE'S assigns an
Excellent rating to Small Cap stocks; Good to Mid Caps; Average to Big/Large
Caps; and Below Average to Mega Caps. ACE'S excludes Micro
and Nano Caps in its stock picks.
Ocwen is classified as a small cap growth company with a market
capitalization of $883.86M and with outstanding shares of
63.36M.
ACE'S gives a preferential rating to small and mid cap companies. ACE'S rating of
Ocwen's
Market Cap: EXCELLENT.^ Back to Evaluation
I. TRADED VOLUME -
AVERAGE
A stock's price goes up or down based on the laws of supply and demand. Simply
stated, when a stock's price goes up, there must be significant buying demand
for the stock. Volume is the actual number of shares traded daily. Traded volume
could be used as a gauge of the demand for a stock.
Ocwen has an 3-month Average Daily Volume of 456,130 shares; and
a 10-day Average Daily Volume of 410,178 shares.
(Refs.:
Yahoo! Finance\Statistics).
ACE'S assigns an Excellent rating for
+1,000,000 trading volumes; Good for 500,001-999,999 volumes; Average for
100,000 - 500,000 volumes; and Below Average for -100,000 volumes.
ACE'S gives a preferential rating to a company that sustains a
lively trade volume from week-to-week and month-to-month. ACE'S rating of
Ocwen's Traded
Volume: AVERAGE.
J. PRICE GROWTH - EXCELLENT
Price growth is the 12-month increase in the price of a
stock (displayed as a percentage). As of 07/21/06, Ocwen had a 3-month growth
rate of 18.9% (vs. the Industry's -0.4% rate), a 6-month rate of 34.2% (vs.
the Industry's 2.1% rate), and a 12-month rate of 74.4% (vs. the
Industry's 3.1% rate).
(Refs.:
MSN Money\Research). ACE'S gives a preferential rating to a company that have
demonstrated a solid capacity for high price growth and outperforming other
stocks in the Industry. ACE'S rating of
Ocwen's
Price Growth: EXCELLENT.