Is Now The Time To Put Ocwen Financial (NYSE:OCN) On Your Watchlist?
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Ocwen Financial (NYSE:OCN). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
Check out our latest analysis for Ocwen Financial
How Fast Is Ocwen Financial Growing Its Earnings Per Share?
Over the last three years, Ocwen Financial has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. Outstandingly, Ocwen Financial's EPS shot from US$2.01 to US$3.41, over the last year. Year on year growth of 70% is certainly a sight to behold.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Not all of Ocwen Financial's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. Ocwen Financial's EBIT margins are flat but, worryingly, its revenue is actually down. Suffice it to say that is not a great sign of growth.
In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Ocwen Financial's future profits.
Are Ocwen Financial Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
It's pleasing to note that insiders spent US$4.0m buying Ocwen Financial shares, over the last year, without reporting any share sales whatsoever. Buying like that is a fantastic look for the company and should rouse the market in anticipation for the future. It is also worth noting that it was company insider Howard Amster who made the biggest single purchase, worth US$3.8m, paying US$29.03 per share.
The good news, alongside the insider buying, for Ocwen Financial bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold US$33m worth of its stock. This considerable investment should help drive long-term value in the business. That amounts to 15% of the company, demonstrating a degree of high-level alignment with shareholders.
Is Ocwen Financial Worth Keeping An Eye On?
Ocwen Financial's earnings per share growth have been climbing higher at an appreciable rate. To make matters even better, the company insiders who know the company best have put their faith in the its future and have been buying more stock. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Ocwen Financial belongs near the top of your watchlist. It is worth noting though that we have found 2 warning signs for Ocwen Financial (1 is a bit unpleasant!) that you need to take into consideration.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Ocwen Financial, you'll probably love this free list of growing companies that insiders are buying.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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