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AGNC vs. HASI: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
Honeywell (HON) might move higher on growing optimism about its earnings prospects, which is reflected by its upgrade to a Zacks Rank 2 (Buy).

Investors interested in stocks from the REIT and Equity Trust sector have probably already heard of AGNC Investment (AGNC) and Hannon Armstrong (HASI). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, AGNC Investment is sporting a Zacks Rank of #2 (Buy), while Hannon Armstrong has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that AGNC is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.

The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

AGNC currently has a forward P/E ratio of 7.30, while HASI has a forward P/E of 15.85. We also note that AGNC has a PEG ratio of 2.43. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. HASI currently has a PEG ratio of 5.28.

Another notable valuation metric for AGNC is its P/B ratio of 0.93. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, HASI has a P/B of 1.82.

Based on these metrics and many more, AGNC holds a Value grade of A, while HASI has a Value grade of F.

AGNC has seen stronger estimate revision activity and sports more attractive valuation metrics than HASI, so it seems like value investors will conclude that AGNC is the superior option right now.

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AGNC Investment Corp. (AGNC) : Free Stock Analysis Report
Hannon Armstrong Sustainable Infrastructure Capital, Inc. (HASI) : Free Stock Analysis Report
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