What is AGNC's Intrinsic value?

AGNC Investment Corp (AGNC) Intrinsic Value Analysis

Executive Summary

As of May 27, 2025, AGNC Investment Corp's estimated intrinsic value ranges from $8.72 to $9.65 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $9.65 +9.2%
Dividend Discount Model (Stable) $8.72 -1.3%

Is AGNC Investment Corp (AGNC) undervalued or overvalued?

With the current market price at $8.84, the stock appears to be fairly valued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate AGNC Investment Corp's intrinsic value, including:

  1. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.64 0.8
Cost of equity 6.8% 9.3%
Cost of debt 4.0% 23.9%
Tax rate 26.2% 27.0%
Debt/Equity ratio 9.24 9.24
After-tax WACC 3.3% 16.6%

Valuation Methods

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 264.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.1%
  • Long-term growth rate: 3.0%
  • Fair value: $9.65 (9.2% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.3% (Low) to 6.8% (High)
  • Long-term growth rate: 3.0% (Low) to 3.1% (High)
  • Fair value range: $5 to $12
  • Selected fair value: $8.72 (-1.3% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $8389M
Enterprise Value $91314M
Trailing P/E 17.85
Forward P/E 32.41
Trailing EV/EBITDA 36.50
Current Dividend Yield 1479.29%
Dividend Growth Rate (5Y) 6.35%
Debt-to-Equity Ratio 9.24

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Dividend Discount Model (Multi-Stage) 57% $1.93
Dividend Discount Model (Stable) 43% $1.31
Weighted Average 100% $9.25

Investment Conclusion

Based on our comprehensive valuation analysis, AGNC Investment Corp's weighted average intrinsic value is $9.25, which is approximately 4.7% above the current market price of $8.84.

Key investment considerations:

  • Strong projected earnings growth (22% to 31% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 6.35%

Given these factors, we believe AGNC Investment Corp is currently fairly valued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.