Assured Guaranty (AGO) Falls Further As It's Water-Logged And Getting Wetter

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.

Trade-Ideas LLC identified Assured Guaranty ( AGO) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Assured Guaranty as such a stock due to the following factors:

  • AGO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $38.3 million.
  • AGO has traded 5.3 million shares today.
  • AGO traded in a range 264.3% of the normal price range with a price range of $1.46.
  • AGO traded below its daily resistance level (quality: 234 days, meaning that the stock is crossing a resistance level set by the last 234 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' 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 negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on AGO:

Assured Guaranty Ltd., through its subsidiaries, provides credit protection products to public finance, infrastructure, and structured finance markets in the United States and internationally. The stock currently has a dividend yield of 1.7%. AGO has a PE ratio of 4. Currently there are 3 analysts that rate Assured Guaranty a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Assured Guaranty has been 1.5 million shares per day over the past 30 days. Assured Guaranty has a market cap of $4.2 billion and is part of the financial sector and insurance industry. The stock has a beta of 2.46 and a short float of 3.6% with 3.90 days to cover. Shares are up 5.5% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Assured Guaranty as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • AGO's very impressive revenue growth greatly exceeded the industry average of 9.5%. Since the same quarter one year prior, revenues leaped by 96.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Although AGO's debt-to-equity ratio of 0.23 is very low, it is currently higher than that of the industry average.
  • 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. In comparison to the other companies in the Insurance industry and the overall market, ASSURED GUARANTY LTD's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • The gross profit margin for ASSURED GUARANTY LTD is currently very high, coming in at 79.58%. It has increased significantly from the same period last year. Along with this, the net profit margin of 52.61% significantly outperformed against the industry average.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.

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