American Capital Agency Corp.

American Capital Agency Corp. (AGNC - Analyst Report) has been publicly traded for less than a year, but the company's early results are solid. The analyst community is bullish, with the next-year estimate projecting 64% earnings growth.

Company Description

American Capital Agency Corp. is a real estate investment trust that invests exclusively in agency securities that are backed by the U.S. government. It has a market cap $311 million.

American Capital completed its IPO less than a year ago, but the company is off to a good start, chiming in with solid third-quarter results in late October.

Third-Quarter Results

Income came in at $18.9 million, producing earnings of $1.26 per share, 31 cents ahead of the Zacks estimate. The company also declared a dividend of $1.00 per share.

During the quarter, American Capital's $1.6 billion investment portfolio yielded an average of 5.50% against the cost of funds of 2.45%, creating a very lucrative 3.05% yield spread.

Risk Management, Reduced Leverage

American Capital also noted that it reduced its leverage to 5.4X during the quarter, down from 8.3X in the previous quarter after disposing of certain assets. The company also said it executed an options strategy that enabled it to reduce its risk profile and boost its ROE, which is trending at an annualized rate of more than 28%.

Analyst Estimates

The company's solid performance has showed up in analyst estimates, with the next-year estimate pegged at $4.03 per share, a 64% earnings growth projection. Based upon the current-year estimate of $2.45, this stock is trading with a P/E multiple of 8X, a discount to the overall market.

The Chart

Shares of AGNC have been on a steady rally since bottoming out at $12 in early October. Since then, this stock has risen above $22, an all-time high. The trend line that has been supporting prices for the last 3 months is being tested, take a look below.

Read the full analyst report on AGNC