• If you are wondering whether AGNC Investment at US$10.86 still offers value or if most of the opportunity is already priced in, this article walks through what the numbers are saying about the stock.
• The share price has returned 2.0% over the past week and 3.7% over the past month, while year to date the stock is down 0.6%. The 1 year and 3 year returns stand at 39.1% and 85.7% respectively, with a 17.5% return over 5 years.
• Recent coverage has focused on AGNC Investment's position within the mortgage REIT space and how interest rate expectations and funding conditions may be influencing investor sentiment. These themes help frame the current share price level and can be useful context when you weigh up what the stock might be worth to you.
• AGNC Investment currently has a valuation score of 5 out of 6 on Simply Wall St's checks for undervaluation. The rest of this article will compare different valuation approaches and finish with a way to go beyond the headline metrics to judge whether that score really fits your own view of the stock.

Approach 1: AGNC Investment Excess Returns Analysis

The Excess Returns model looks at how much profit a company can generate over and above the return that equity investors require, then attributes that stream of “excess” profits to each share.

For AGNC Investment, the model starts with a Book Value of $8.90 per share and a Stable EPS of $1.54 per share, based on weighted future Return on Equity estimates from 6 analysts. The Average Return on Equity is 16.21%, compared with a Cost of Equity of $0.92 per share, which leaves an Excess Return of $0.61 per share. The Stable Book Value is modeled at $9.47 per share, using future Book Value estimates from 4 analysts.

Simply Wall St aggregates these inputs into an intrinsic value estimate of $19.29 per share under the Excess Returns approach. Compared with the current share price of $10.86, this implies the stock is 43.7% undervalued on this model.

Result: UNDERVALUED

Our Excess Returns analysis suggests AGNC Investment is undervalued by 43.7%. Track this in your watchlist or portfolio, or discover 50 more high quality undervalued stocks.

Approach 2: AGNC Investment Price vs Earnings

For profitable companies, the P/E ratio is a useful way to think about what investors are currently paying for each dollar of earnings. It helps you compare how the market prices earnings across different stocks using a single, intuitive metric.

What counts as a “normal” or “fair” P/E ratio often comes down to what investors expect for future earnings growth and how much risk they see in those earnings. Higher expected growth or lower perceived risk can support a higher P/E, while lower growth or higher risk can point to a lower figure.

AGNC Investment currently trades on a P/E of 9.57x. That sits below the Mortgage REITs industry average of 12.50x and also below the peer average of 12.28x. Simply Wall St goes further by estimating a “Fair Ratio” of 14.81x, which is the P/E level suggested by factors such as AGNC Investment’s earnings profile, industry, profit margins, size and risk characteristics.

This Fair Ratio is more tailored than a simple peer or industry comparison because it adjusts for company specific features rather than relying only on broad averages. Compared with the current P/E of 9.57x, the Fair Ratio of 14.81x points to AGNC Investment trading below that model based reference level.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your AGNC Investment Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives give you a simple story for AGNC Investment that ties your view on its future revenue, earnings and margins to a forecast and a fair value, then compares that fair value with the current price. All of this is available within an easy tool on Simply Wall St's Community page that updates as fresh news or earnings arrive. One investor might focus on the more optimistic view with a US$11.00 price target, while another leans toward the cautious US$8.25 view, and each can see how their own assumptions translate into a clear, story backed number.

Do you think there's more to the story for AGNC Investment? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.