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American Capital Agency (AGNC) Marked As A Barbarian At The Gate

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified American Capital Agency ( AGNC) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified American Capital Agency as such a stock due to the following factors:

  • AGNC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $96.8 million.
  • AGNC has traded 3.5 million shares today.
  • AGNC traded in a range 269.6% of the normal price range with a price range of $1.12.
  • AGNC traded above its daily resistance level (quality: 161 days, meaning that the stock is crossing a resistance level set by the last 161 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on AGNC:

American Capital Agency Corp. operates as a real estate investment trust (REIT). The stock currently has a dividend yield of 11.5%. AGNC has a PE ratio of 6.9. Currently there are 4 analysts that rate American Capital Agency a buy, no analysts rate it a sell, and 10 rate it a hold.

The average volume for American Capital Agency has been 5.2 million shares per day over the past 30 days. American Capital Agency has a market cap of $7.7 billion and is part of the financial sector and real estate industry. The stock has a beta of 0.05 and a short float of 2.6% with 2.10 days to cover. Shares are up 13.8% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates American Capital Agency as a hold. The company's strengths can be seen in multiple areas, such as its notable return on equity, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, AMERICAN CAPITAL AGENCY CORP's return on equity exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for AMERICAN CAPITAL AGENCY CORP is currently very high, coming in at 130.89%. It has increased significantly from the same period last year. Along with this, the net profit margin of 81.30% significantly outperformed against the industry average.
  • AGNC, with its very weak revenue results, has greatly underperformed against the industry average of 6.7%. Since the same quarter one year prior, revenues plummeted by 113.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • AMERICAN CAPITAL AGENCY CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, AMERICAN CAPITAL AGENCY CORP reported lower earnings of $3.17 versus $4.40 in the prior year. For the next year, the market is expecting a contraction of 14.9% in earnings ($2.70 versus $3.17).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 112.3% when compared to the same quarter one year ago, falling from $811.00 million to -$100.00 million.

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