Walker & Dunlop (NYSE: WD) and Ocwen Financial Corporation (NYSE:OCN) are both small-cap finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their valuation, dividends, institutional ownership, profitability, analyst recommendations, earnings and risk.

Insider and Institutional Ownership

77.3% of Walker & Dunlop shares are owned by institutional investors. Comparatively, 48.5% of Ocwen Financial Corporation shares are owned by institutional investors. 11.7% of Walker & Dunlop shares are owned by insiders. Comparatively, 5.2% of Ocwen Financial Corporation shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Profitability

This table compares Walker & Dunlop and Ocwen Financial Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Walker & Dunlop 21.91% 22.86% 5.38%
Ocwen Financial Corporation -5.95% -12.41% -1.01%

Valuation & Earnings

This table compares Walker & Dunlop and Ocwen Financial Corporation’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Walker & Dunlop $649.05 million 2.26 $142.17 million $4.55 10.33
Ocwen Financial Corporation $1.32 billion 0.30 $352.81 million ($0.62) -4.86

Ocwen Financial Corporation has higher revenue and earnings than Walker & Dunlop. Ocwen Financial Corporation is trading at a lower price-to-earnings ratio than Walker & Dunlop, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current recommendations and price targets for Walker & Dunlop and Ocwen Financial Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Walker & Dunlop 0 2 1 0 2.33
Ocwen Financial Corporation 0 5 0 0 2.00

Walker & Dunlop currently has a consensus price target of $44.00, indicating a potential downside of 6.34%. Ocwen Financial Corporation has a consensus price target of $3.33, indicating a potential upside of 10.56%. Given Ocwen Financial Corporation’s higher probable upside, analysts plainly believe Ocwen Financial Corporation is more favorable than Walker & Dunlop.

Volatility & Risk

Walker & Dunlop has a beta of 1.4, indicating that its stock price is 40% more volatile than the S&P 500. Comparatively, Ocwen Financial Corporation has a beta of 1.25, indicating that its stock price is 25% more volatile than the S&P 500.

Summary

Walker & Dunlop beats Ocwen Financial Corporation on 10 of the 13 factors compared between the two stocks.

Walker & Dunlop Company Profile

Walker & Dunlop, Inc. is a holding company, which conducts its operations through Walker & Dunlop, LLC. The Company provides commercial real estate financial products and services primarily to developers and owners of multifamily properties. The Company originates, sells and services a range of multifamily and other commercial real estate financing products, including Multifamily Finance, Federal Housing Administration (FHA) Finance, Capital Markets, and Proprietary Capital. It originates and sells loans through the programs of the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac, and together with Fannie Mae, the government-sponsored enterprises (GSEs)), the Government National Mortgage Association (Ginnie Mae) and the Federal Housing Administration, a division of the United States Department of Housing and Urban Development (together with Ginnie Mae, HUD).

Ocwen Financial Corporation Company Profile

Ocwen Financial Corporation is a financial services holding company. The Company, through its subsidiaries, originates and services loans. The Company’s segments include Servicing, Lending, and Corporate Items and Other. The Company’s Servicing segment consists of its residential servicing business. The Company’s Lending segment is focused on originating and purchasing conventional and government-insured residential forward and reverse mortgage loans. The Company’s Corporate Items and Other segment includes revenues and expenses of Automotive Capital Services (ACS) and its other business activities. Its servicing clients include some of the financial institutions in the United States, including the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), the Government National Mortgage Association (Ginnie Mae) and non-Agency residential mortgage-backed securities (RMBS) trusts.

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