American Capital Agency (AGNC) Is Today's Roof Leaker Stock

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 "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) 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 $60.5 million.
  • AGNC has traded 688,905 shares today.
  • AGNC is trading at 1.57 times the normal volume for the stock at this time of day.
  • AGNC crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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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 11.4%. Currently there are 4 analysts that rate American Capital Agency a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for American Capital Agency has been 4.8 million shares per day over the past 30 days. American Capital Agency has a market cap of $8.2 billion and is part of the financial sector and real estate industry. The stock has a beta of 0.25 and a short float of 1.4% with 1.82 days to cover. Shares are up 20% year-to-date as of the close of trading on Wednesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates American Capital Agency as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, AMERICAN CAPITAL AGENCY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $362.00 million or 23.30% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • AMERICAN CAPITAL AGENCY CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings 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 68.1% in earnings ($1.01 versus $3.17).
  • The gross profit margin for AMERICAN CAPITAL AGENCY CORP is currently very high, coming in at 90.57%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, AGNC's net profit margin of 53.09% significantly outperformed against the industry.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 128.1% when compared to the same quarter one year prior, rising from -$701.00 million to $197.00 million.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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