Head-To-Head Analysis: PennyMac Financial Services (PFSI) & Ocwen Financial Corporation (OCN)
PennyMac Financial Services (NYSE: PFSI) and Ocwen Financial Corporation (NYSE:OCN) are both small-cap finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their risk, valuation, dividends, profitability, institutional ownership, earnings and analyst recommendations.
This table compares PennyMac Financial Services and Ocwen Financial Corporation’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|PennyMac Financial Services||6.87%||4.79%||1.21%|
|Ocwen Financial Corporation||-5.95%||-12.41%||-1.01%|
Insider & Institutional Ownership
87.7% of PennyMac Financial Services shares are held by institutional investors. Comparatively, 48.5% of Ocwen Financial Corporation shares are held by institutional investors. 45.6% of PennyMac Financial Services shares are held by company insiders. Comparatively, 2.4% of Ocwen Financial Corporation shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.
Volatility and Risk
PennyMac Financial Services has a beta of 0.61, suggesting that its stock price is 39% less volatile than the S&P 500. Comparatively, Ocwen Financial Corporation has a beta of 1.26, suggesting that its stock price is 26% more volatile than the S&P 500.
This is a summary of recent recommendations and price targets for PennyMac Financial Services and Ocwen Financial Corporation, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|PennyMac Financial Services||1||1||5||0||2.57|
|Ocwen Financial Corporation||0||4||0||0||2.00|
PennyMac Financial Services currently has a consensus price target of $20.25, suggesting a potential upside of 8.29%. Ocwen Financial Corporation has a consensus price target of $3.33, suggesting a potential downside of 5.30%. Given PennyMac Financial Services’ stronger consensus rating and higher possible upside, equities research analysts clearly believe PennyMac Financial Services is more favorable than Ocwen Financial Corporation.
Valuation & Earnings
This table compares PennyMac Financial Services 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|
|PennyMac Financial Services||$1.24 billion||0.35||$69.83 million||$2.97||6.30|
|Ocwen Financial Corporation||$1.32 billion||0.35||$352.81 million||($0.62)||-5.68|
Ocwen Financial Corporation has higher revenue and earnings than PennyMac Financial Services. Ocwen Financial Corporation is trading at a lower price-to-earnings ratio than PennyMac Financial Services, indicating that it is currently the more affordable of the two stocks.
PennyMac Financial Services beats Ocwen Financial Corporation on 10 of the 13 factors compared between the two stocks.
PennyMac Financial Services Company Profile
PennyMac Financial Services, Inc. (PFSI) is a financial services company. The Company is focused on the production and servicing of the United States residential mortgage loans and the management of investments related to the United States mortgage market. The Company operates through three segments: loan production, loan servicing and investment management. PFSI’s mortgage banking subsidiary, PennyMac Loan Services, LLC (PLS), is a non-bank producer and servicer of mortgage loans in the United States. As of December 31, 2016, PLS serviced loans in all 50 states, the District of Columbia, Guam and the United States Virgin Islands, and originated loans in 49 states and the District of Columbia. PFSI’s investment management subsidiary, PNMAC Capital Management, LLC (PCM), is an investment advisor. PLS is a seller and servicer for the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).
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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