A company to invest in
Similar to the companies above, Home Loan Servicing Solutions Ltd (NASDAQ:HLSS), or HLSS, focuses on acquiring mortgage servicing assets. With the stock priced below the investors.com potential buy point of $24, trading at 14.3 times its earnings, at less than 1/10th of the industry average, I’d strongly recommend buying into this company. Operating margin of 87% and net margin of 86.9% comfortably surpass the respective 63.2% and 14% industry means and provide extra reasons to invest in this firm. Numerous funds, including AlianzGI and Neuberger Berman Genesis, have already noticed the potential of the company and have been buying stocks at large. Further evidence is provided by insiders also purchasing shares this year. Even more attractive is Home Loan Servicing Solutions Ltd (NASDAQ:HLSS)’ dividend yield which, at 7.07%, beats most of its peers.
Currently, the firm is focused on increasing its asset base by acquiring more mortgage servicing assets. Last quarter, it completed its third flow purchase from Ocwen since our inception, two years ago, adding $15.9 billion of UPB to its servicing portfolio, which now amounts to $92.5 billion. As Ocwen has benefited from these sales, Home Loan Servicing Solutions Ltd (NASDAQ:HLSS) expects to continue to purchase such assets and expand its servicing portfolio. Furthermore, the company has focused extra efforts in receiving the necessary permissions to become named servicers for the securitizations where it already own Rights to MSRs and the associated servicing advances. If consent was attained, revenue could largely sore.
Finally, last quarter’s financial results cannot be overlooked. Revenue grew by 1,296% to $45 million, mainly on the back of interest income, and earnings rose 42%, to $0.44 per diluted share, above the analyst consensus estimate. This has led to an expected revenue growth of 278% and earnings increase by 18% for 2013. With a history beating consensus estimates, it would not be a surprise if this were the case for the upcoming quarters. I’d say buy and hold, the outlook is looking good.
Bottom line
The above described financial companies offer compelling investment opportunities, especially for long-term stockholders. Particularly, Ocwen Financial Corp (NYSE:OCN)’s prospects looks very promising. Just like Home Loan Servicing Solutions Ltd (NASDAQ:HLSS), I believe that this firm is poised to grow and, therefore, comprises a buy and hold case.
The article 3 Stocks With Steady Growth Prospects originally appeared on Fool.com and is written by Victor Selva.
Victor Selva has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Victor 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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