Recent performance context for Assured Guaranty
Assured Guaranty (AGO) has recently drawn investor attention after a stretch of weaker share performance, with the stock showing negative returns over the past week, month, past 3 months, year to date, and the past year.
This softer run comes against a backdrop of modest annual revenue growth of 1.6% and a 30.5% decline in net income. This highlights a mixed fundamental picture that investors may want to weigh against the company’s multi segment insurance and asset management model.
See our latest analysis for Assured Guaranty.
Recent share price weakness, including an 8.0% 30-day share price return decline and a 12.6% 90-day share price return decline from US$79.29, contrasts with a much stronger three and five year total shareholder return. This suggests fading near-term momentum while longer term holders have still seen solid gains.
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With revenue growth of 1.6%, a 30.5% drop in net income, and the share price sitting at US$79.29 against a US$105.75 analyst target, is this recent pullback a genuine opportunity, or is the market already pricing in future growth?
Preferred P/E of 7.1x: Is it justified?
Assured Guaranty is trading on a P/E of 7.1x, which sits below both peer and wider US insurance benchmarks, even after the recent share price pullback to $79.29.
The P/E multiple compares the share price to earnings, so you are effectively seeing how much the market is paying for each dollar of profit. For an insurer and credit protection business like Assured Guaranty, this often reflects how investors view the sustainability of earnings, the quality of those profits, and the risk profile of the balance sheet.
On one hand, Assured Guaranty screens as good value on headline comparisons, with a 7.1x P/E below the peer average of 10.3x and the US Insurance industry average of 10.9x. On the other hand, the estimated fair P/E of 5.6x suggests the current multiple is still above the level the SWS fair ratio points to as more appropriate. This gap highlights how the market could move if earnings or sentiment shift closer to those fair ratio assumptions.
Explore the SWS fair ratio for Assured Guaranty
Result: Price-to-Earnings of 7.1x (ABOUT RIGHT)
However, recent share price declines and a 30.5% net income drop could point to pressure on earnings quality and investor confidence, which challenges the current P/E narrative.
Find out about the key risks to this Assured Guaranty narrative.
Another View: Cash Flows Point to a Deeper Discount
While the 7.1x P/E suggests Assured Guaranty is only slightly ahead of its 5.6x fair ratio, the SWS DCF model paints a different picture. With the share price at $79.29 and an estimated future cash flow value of $191.09, the stock screens as heavily undervalued. Which signal do you trust more?
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 Assured Guaranty 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 62 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
Mixed signals on price, earnings, and cash flows can feel hard to read, so it helps to look at the full picture for yourself and decide how comfortable you are with both the upside and the downside, including 4 key rewards and 2 important warning signs.
Looking for more investment ideas?
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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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