Although AGNC Investment (currently trading at $9.88 per share) has gained 14.1% over the last six months, it has trailed the S&P 500’s 33.2% return during that period. This was partly due to its softer quarterly results and might have investors contemplating their next move.

Is now the time to buy AGNC Investment, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free for active Edge members.

Why Do We Think AGNC Investment Will Underperform?

We're cautious about AGNC Investment. Here are three reasons why AGNC doesn't excite us and a stock we'd rather own.

1. Declining Net Interest Income Reflects Weakness

Net interest income commands greater market attention due to its reliability and consistency, whereas one-time fees are often seen as lower-quality revenue that lacks the same dependable characteristics.

AGNC Investment’s net interest income has declined by 28.5% annually over the last five years, much worse than the broader banking industry. This shows that lending underperformed its other business lines.

2. 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 7.1% annually over the last five years while its revenue grew by 16.6%. This tells us the company became less profitable on a per-share basis as it expanded.

3. Declining TBVPS Reflects Erosion of Asset Value

For banks, tangible book value per share (TBVPS) is a crucial metric that measures the actual value of shareholders’ equity, stripping out goodwill and other intangible assets that may not be recoverable in a worst-case scenario.

Disappointingly for investors, AGNC Investment’s TBVPS declined at a 8.9% annual clip over the last two years.

Final Judgment

AGNC Investment falls short of our quality standards. With its shares underperforming the market lately, the stock trades at 1.1× forward P/B (or $9.88 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better stocks to buy right now. Let us point you toward our favorite semiconductor picks and shovels play.

Stocks We Would Buy Instead of AGNC Investment

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