3 Reasons AGNC is Risky and 1 Stock to Buy Instead

AGNC Investment has been treading water for the past six months, recording a small loss of 3.4% while holding steady at $9.32.

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 sitting this one out for now. Here are three reasons why you should be careful with AGNC and a stock we'd rather own.

1. EPS Trending Down

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

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 (ROE) measures how effectively banks generate profit from each dollar of shareholder equity — a critical funding source. High-ROE institutions typically compound shareholder wealth faster over time through retained earnings, share repurchases, and dividend payments.

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

AGNC Investment doesn’t pass our quality test. That said, the stock currently trades at 1× forward P/B (or $9.32 per share). At this valuation, there’s a lot of good news priced in - we think there are better stocks to buy right now. We’d suggest looking at a dominant Aerospace business that has perfected its M&A strategy.

Stocks We Would Buy Instead of AGNC Investment

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