Compass Point Upgrades American Capital Mortgage (MTGE) to Buy on Strong Q3

November 1, 2012 10:16 AM EDT Send to a Friend
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Price: $18.31 -0.38%

Rating Summary:
    4 Buy, 5 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 11 | Down: 28 | New: 23
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Compass Point upgraded American Capital Mortgage (NASDAQ: MTGE) from Neutral to Buy with a price target of $27.00 (from $23.00) following strong Q3 results.

The firm comments, "We are upgrading the shares of MTGE to Buy from Neutral and raising our price target to $27 following 3Q12 earnings. Our new $27 price target represents a multiple of 1.07x 3Q12 book value per share and a 13.3% pro forma dividend yield. Yesterday after the close, MTGE announced the strongest quarter since the Company's IPO in terms of shareholder value creation. During the quarter, MTGE generated an annualized economic return of 72% through a $3.13 per share increase in book value per share and $0.90 in dividends. The Company also announced a $50mm share repurchase plan that grants the Board of Directors authorization to repurchase common stock through YE13. We believe this capital action will serve as an effective floor for MTGE's share price. Considering the strong returns, stable dividend outlook and the current valuation of shares, we believe the risk versus reward is positively skewed in investors favor. If achieved, our price target represents a total return opportunity of 22.7%."

For an analyst ratings summary and ratings history on American Capital Mortgage click here. For more ratings news on American Capital Mortgage click here.

Shares of American Capital Mortgage closed at $24.93 yesterday.

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