Amazing Upside Left at Ocwen Financial Corp (OCN)

The stock could also benefit from investor hopes that Nationstar Mortgage Holdings Inc (NYSE:NSM) will spin off the Solutionstar unit to the same success as the Altisource Portfolio Solutions S.A.(NASDAQ:ASPS) spin-offs from Ocwen Financial Corp (NYSE:OCN). As an example, Altisource Portfolio Solutions S.A. (NASDAQ:ASPS) has grown by 500% since it was spun-off in August 2009.

Altisource Portfolio Solutions S.A.(NASDAQ:ASPS) is benefiting from the same sector moves with earnings expected to surge from $4.43 in 2012 to over $8.50 by 2014. The stock unlike the major mortgage servicers trades at nearly double the multiple with the stock trading at over 11 times earnings.

While the Nationstar Mortgage Holdings Inc (NYSE:NSM) stock might see a bump from a spin-off of the Solutionstar unit, investors shouldn’t expect a similar jump as the move from Altisource Portfolio Solutions S.A.(NASDAQ:ASPS) back during the financial depression.

Bottom line

While the substantial revenue growth that will occur in 2013 won’t be duplicated at that level in 2014 and beyond, the companies should continue growing earnings into the out years. The stocks trade at significant discounts to the cash flows being generated. The group has traded relatively flat the last six months providing an opportunity for investors to buy these stocks at 6-7 times 2014 earnings and in the case of Ocwen at only 7 times last year’s cash flow. Remember this is while the stock market as a whole trades at 2-3 times those multiples.

The article Amazing Upside Left at Ocwen Financial originally appeared on Fool.com.

Mark Holder and Stone Fox Capital Advisors, LLC have no positions in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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