• Wondering if AGNC Investment at around US$10.43 offers real value or just headline appeal? This article walks through what the current price might be implying and how that lines up with different valuation checks.
• The stock has risen 3.0% over the last week, while being down 5.4% over the last month and 4.6% year to date, and showing a 33.9% return over the last year and 73.2% over three years, with a 9.6% return over five years.
• Recent coverage has focused on AGNC Investment as a widely followed mortgage REIT, with investors paying close attention to interest rate expectations and the impact these can have on book value and funding costs. This context helps explain why the stock can move sharply in shorter periods even when the longer term picture looks different.
• AGNC Investment currently holds a valuation score of 5/6, and the next sections break down what each of those checks suggests about price, before circling back at the end to a broader way of thinking about what valuation really tells you.

AGNC Investment delivered 33.9% returns over the last year. See how this stacks up to the rest of the Mortgage REITs industry.

Approach 1: AGNC Investment Excess Returns Analysis

The Excess Returns model looks at how much profit a company is expected to earn above the return required by shareholders, then capitalizes those “extra” profits into an intrinsic value per share.

For AGNC Investment, the starting point is a Book Value of $8.90 per share and a Stable Book Value estimate of $9.47 per share, based on weighted future book value estimates from 4 analysts. The model uses a Stable EPS of $1.54 per share, sourced from weighted future return on equity estimates from 6 analysts, and compares this with a Cost of Equity of $1.01 per share. The difference between these, an Excess Return of $0.53 per share, reflects earnings above the required shareholder return, supported by an average Return on Equity of 16.21%.

Aggregating these excess returns produces an intrinsic value of about $16.93 per share under this framework. Compared with the current share price of around $10.43, the Excess Returns valuation implies the stock is 38.4% undervalued on this measure.

Result: UNDERVALUED

Our Excess Returns analysis suggests AGNC Investment is undervalued by 38.4%. Track this in your watchlist or portfolio, or discover 46 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for AGNC Investment.

Approach 2: AGNC Investment Price vs Earnings

For profitable companies, the P/E ratio is a useful shortcut because it tells you how much you are paying for each dollar of earnings. It links directly to what most shareholders ultimately care about, which is how the market prices current earnings relative to what it expects later on.

A higher or lower P/E often reflects what the market thinks about future growth and risk. Stronger expected earnings growth or lower perceived risk can support a higher “normal” P/E, while slower expected growth or higher risk usually points to a lower one.

AGNC Investment currently trades at a P/E of 9.20x. That sits below the Mortgage REITs industry average of 11.69x and below the peer group average of 11.86x. Simply Wall St’s Fair Ratio for AGNC Investment is 14.70x, which is a proprietary estimate of what the P/E might be given factors such as earnings growth, profit margins, industry, market cap and risk profile.

The Fair Ratio can be more informative than a simple industry or peer comparison because it adjusts for those company specific characteristics rather than assuming one size fits all. Comparing 14.70x with the current 9.20x suggests the stock screens as undervalued on this metric.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your AGNC Investment Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives let you spell out your story for AGNC Investment by linking your view on its business, future revenue, earnings and margins to a clear forecast and fair value on Simply Wall St’s Community page. You can then compare that fair value with today’s price to help judge whether you see the stock as attractively or expensively priced. Each Narrative updates as new news or earnings arrive. One investor might build a Narrative around the most optimistic analyst target of US$11.00 based on higher confidence in revenue growth and margins, while another leans on the US$8.25 target and focuses on risks around interest rate volatility and Agency MBS spreads. Both can see in real time how fresh information shifts their stories and numbers.

Do you think there's more to the story for AGNC Investment? Head over to our Community to see what others are saying!

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Disclaimer:This article represents the opinion of the author only. It does not represent the opinion of Webull, nor should it be viewed as an indication that Webull either agrees with or confirms the truthfulness or accuracy of the information. It should not be considered as investment advice from Webull or anyone else, nor should it be used as the basis of any investment decision.