3 Reasons to Sell AGNC and 1 Stock to Buy Instead

AGNC Investment has been treading water for the past six months, recording a small loss of 2.9% while holding steady at $9.33.

Is there a buying opportunity in AGNC Investment, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.

Why Do We Think AGNC Investment Will Underperform?

We're swiping left on AGNC Investment for now. Here are three reasons why there are better opportunities than AGNC and a stock we'd rather own.

1. EPS Trending Down

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Sadly for AGNC Investment, its EPS declined by 4.4% annually over the last five years while its revenue grew by 18.2%. This tells us the company became less profitable on a per-share basis as it expanded.

2. Declining TBVPS Reflects Erosion of Asset Value

We consider tangible book value per share (TBVPS) the most important metric to track for banks. TBVPS represents the real, liquid net worth per share of a bank, excluding intangible assets that have debatable value upon liquidation.

To the detriment of investors, AGNC Investment’s TBVPS declined at a 6.5% annual clip over the last two years.

3. Previous Growth Initiatives Haven’t Impressed

Return on equity, or ROE, quantifies bank profitability relative to shareholder equity — an essential capital source for these institutions. Over extended periods, superior ROE performance drives faster shareholder wealth compounding through reinvestment, share repurchases, and dividend growth.

Over the last five years, AGNC Investment has averaged an ROE of 5.2%, uninspiring for a company operating in a sector where the average shakes out around 7.5%. This shows AGNC Investment has a weak competitive moat.

Final Judgment

We see the value of companies driving economic growth, but in the case of AGNC Investment, we’re out. That said, the stock currently trades at 1× forward P/B (or $9.33 per share). This multiple tells us a lot of good news is priced in - we think there are better stocks to buy right now. We’d suggest looking at our favorite semiconductor picks and shovels play.

Stocks We Would Buy Instead of AGNC Investment

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