Assured Guaranty (AGO) Stock Fluctuating on Puerto Rico Debt Crisis Fallout

NEW YORK (TheStreet) -- Assured Guaranty (AGO) shares are flat at $23.76 on heavy volume as the stock has fluctuated between negative and positive territory in trading today as it continues to suffer the fallout from Puerto Rico announcing that it cannot repay its $72 billion debt.

Puerto Rico Governor Alejandro Garcia Padilla told the New York Times Friday that the country was unable to pay off its debts and as of March 31 Assured Guaranty held about $4.9 billion of par exposure to the U.S. territory, according to Bloomberg.

Yesterday a newly appointed adviser to the territory, who also was the judge that oversaw Detroit's bankruptcy proceedings, said that the island was insolvent and would soon run out of cash, according to Reuters.

"It can no longer pay its debts, it will soon run out of cash to operate, its residents and businesses will suffer," said retired U.S. Bankruptcy Court judge Steven Rhodes.

Jim Cramer, portfolio manager of the Action Alerts PLUS charitable trust had this to say about Puerto Rico's debt crisis, "Everybody had it. Rich people had Puerto Rico. Mutual funds had Puerto Rico [bonds]. A lot of hedge funds had levered up Puerto Rico because it was such a great trade. It turned out to be not so great."

TheStreet Ratings team rates ASSURED GUARANTY LTD as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate ASSURED GUARANTY LTD (AGO) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. 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 analysis by TheStreet Ratings Team goes as follows:

  • 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.
  • You can view the full analysis from the report here: AGO Ratings Report

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