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American Capital Agency Corp. Stock Downgraded (AGNC)

NEW YORK (TheStreet) -- American Capital Agency (Nasdaq:AGNC) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally poor debt management and disappointing return on equity.

Highlights from the ratings report include:

  • AGNC's very impressive revenue growth greatly exceeded the industry average of 18.1%. Since the same quarter one year prior, revenues leaped by 156.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • The debt-to-equity ratio is very high at 7.72 and currently higher than the industry average, implying that there is very poor management of debt levels within the company.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, AMERICAN CAPITAL AGENCY CORP's return on equity is below that of both the industry average and the S&P 500.

American Capital Agency Corp. operates as a real estate investment trust (REIT). The company has a P/E ratio of 5.7, equal to the average real estate industry P/E ratio and below the S&P 500 P/E ratio of 17.7. American Capital Agency has a market cap of $10.51 billion and is part of the financial sector and real estate industry. Shares are up 24.5% year to date as of the close of trading on Monday.

You can view the full American Capital Agency Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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