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Should Value Investors Pick AGNC Investment (AGNC) Stock?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put AGNC Investment Corp. (AGNC - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, AGNC Investment has a trailing twelve months PE ratio of 7.9, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 21.4. If we focus on the stock’s long-term PE trend, the current level puts AGNC Investment’s current PE ratio equivalent to its midpoint (which is also 7.9) over the past five years.
Further, the stock’s PE also compares favorably with the industry’s trailing twelve months PE ratio, which stands at 9.9. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that AGNC Investment has a forward PE ratio (price relative to this year’s earnings) of just 7.9, equal to the company’s trailing twelve months PE ratio.
P/CF Ratio
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.
The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.
In this case, AGNC Investment’s P/CF ratio of 4.3 is slightly lower than the industry average of 5.4, which indicates that the stock is somewhat undervalued in this respect.
Broad Value Outlook
In aggregate, AGNC Investment currently has a Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes AGNC a solid choice for value investors.
What About the Stock Overall?
Though AGNC Investment might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of F and a Momentum score of D. This gives AGNC a VGM score—or its overarching fundamental grade—of D. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been encouraging. The current quarter consensus estimate has risen about 1.6% in the past two months, while the full year estimate has inched up 0.4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Despite having a somewhat bullish trend, AGNC carrries a Zacks Rank #3 (Hold). This indicates that analysts have some apprehensions about the stock in the immediate future. Thus, we are looking for in-line performance from the company in the near term.
Bottom Line
AGNC Investment is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (bottom 40% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past one year, the sector has clearly underperformed the broader market, as you can see below:
Despite positive estimate revision activity, investors should wait for industry trends and broader factors to turn around first. When they do, this stock could be a compelling value pick.
Investor Alert: Breakthroughs Pending
A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline.
Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.
Image: Bigstock
Should Value Investors Pick AGNC Investment (AGNC) Stock?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put AGNC Investment Corp. (AGNC - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, AGNC Investment has a trailing twelve months PE ratio of 7.9, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 21.4. If we focus on the stock’s long-term PE trend, the current level puts AGNC Investment’s current PE ratio equivalent to its midpoint (which is also 7.9) over the past five years.
Further, the stock’s PE also compares favorably with the industry’s trailing twelve months PE ratio, which stands at 9.9. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that AGNC Investment has a forward PE ratio (price relative to this year’s earnings) of just 7.9, equal to the company’s trailing twelve months PE ratio.
P/CF Ratio
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.
The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.
In this case, AGNC Investment’s P/CF ratio of 4.3 is slightly lower than the industry average of 5.4, which indicates that the stock is somewhat undervalued in this respect.
Broad Value Outlook
In aggregate, AGNC Investment currently has a Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes AGNC a solid choice for value investors.
What About the Stock Overall?
Though AGNC Investment might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of F and a Momentum score of D. This gives AGNC a VGM score—or its overarching fundamental grade—of D. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been encouraging. The current quarter consensus estimate has risen about 1.6% in the past two months, while the full year estimate has inched up 0.4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
AGNC Investment Corp. Price and Consensus
AGNC Investment Corp. Price and Consensus | AGNC Investment Corp. Quote
Despite having a somewhat bullish trend, AGNC carrries a Zacks Rank #3 (Hold). This indicates that analysts have some apprehensions about the stock in the immediate future. Thus, we are looking for in-line performance from the company in the near term.
Bottom Line
AGNC Investment is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (bottom 40% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past one year, the sector has clearly underperformed the broader market, as you can see below:
Despite positive estimate revision activity, investors should wait for industry trends and broader factors to turn around first. When they do, this stock could be a compelling value pick.
Investor Alert: Breakthroughs Pending
A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline.
Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.
Click here to see them >>