AGNC Investment (AGNC): Assessing Valuation After Strong Shareholder Returns and Recent Gains

AGNC Investment (AGNC) has recently caught the eye of investors, thanks to its steadily improving performance over the past month. With shares gaining 4% during this period, there is renewed curiosity about the company’s prospects and valuation.

See our latest analysis for AGNC Investment.

After a strong run so far in 2024, AGNC Investment’s momentum appears to be building. The company’s 1-year total shareholder return stands at an impressive 26.9%. Its share price has climbed 10.3% year-to-date, signaling renewed optimism among investors about its growth and income potential.

If rising returns in income-focused stocks have you curious, it might be the perfect moment to discover new opportunities through our fast growing stocks with high insider ownership.

The question for investors now is whether AGNC Investment’s upward trend is signaling an undervalued opportunity, or if the recent gains mean the market has already priced in future growth potential. Could this still be a good time to buy?

Price-to-Earnings of 16x: Is it justified?

AGNC Investment currently trades with a price-to-earnings (P/E) ratio of 16x, which sits below that of its peer average and estimated fair value. At a last close of $10.24, the market appears to be assigning a modest earnings multiple compared to similar companies.

The price-to-earnings ratio measures how much investors are willing to pay for each dollar of the company's earnings. For a mortgage REIT like AGNC, it is an important indicator showing investor confidence in sustainable profits and future distributions.

At 16x P/E, AGNC offers better value than its peer group, which averages 17.5x, and trades below our estimated fair P/E ratio of 21.1x. This suggests the current market price may under-reflect the company's potential, especially if forecasts for profit growth hold true over coming years. The discount to both industry and fair value benchmarks points to a possible value opportunity if AGNC delivers on its earnings potential.

Explore the SWS fair ratio for AGNC Investment

Result: Price-to-Earnings of 16x (UNDERVALUED)

However, risks such as fluctuating interest rates and changes in mortgage markets could challenge AGNC Investment's future returns. Ongoing monitoring is essential.

Find out about the key risks to this AGNC Investment narrative.

Another View: Discounted Cash Flow Signals Big Upside

Taking a different approach, our DCF model estimates AGNC Investment’s fair value much higher, close to $22.78 per share. With the stock trading at $10.24, this suggests it could be significantly undervalued by the market. Could the DCF be highlighting potential the market is missing?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out AGNC Investment for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 844 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own AGNC Investment Narrative

If you see a different story in the numbers or want to investigate further, you can put together your own perspective in just a few minutes. Start with Do it your way.

A great starting point for your AGNC Investment research is our analysis highlighting 2 key rewards and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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