Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 6 stocks made the list for top value stocks in the Banks industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Why Focus on Undervalued Banks Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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6 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 6 undervalued stocks in the Banks industry for Friday, November 17, 2023. Let’s take a closer look at their individual scores to see how they measure up against each other and the Banks industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

AMB Financial Corp.’s Value Grade

Value Grade:

AMB Financial Corp. is a bank holding company for American Community Bank of Indiana (the Bank). The Company?s primary market area consists of the northwest portion of Lake County, Indiana. The Bank is a community-oriented institution whose business consists primarily of accepting deposits from customers within its market area and investing those funds in mortgage loans secured by residential and non-residential real estate as well as non-real estate commercial and consumer loans. The Company also invests in mortgage-backed and other investment securities. Its personal banking services include checking accounts, savings accounts, money market, digital banking, credit cards, investments, and deposit rates. Its business banking services include business checking, business lending, merchant services, remote deposits, and receivables financing. It also offers personal online banking, business online banking and business mobile apps.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

AMB Financial Corp. has a Value Score of 96, which is considered to be undervalued.

When you look at AMB Financial Corp.’s price-to-sales ratio at 1.01 compared to the industry median at 1.92, this company has a lower price relative to revenue compared to its peers. This could make AMB Financial Corp.’s stock more attractive for value investors.

AMB Financial Corp.’s price-earnings ratio is 5.84 compared to the industry median at 8.39. This means it has a lower share price relative to earnings compared to its peers. This could make AMB Financial Corp. more attractive for value investors.

Now, let’s assess AMB Financial Corp.’s EV/EBITDA ratio, also known as enterprise multiple. At 4.1, when compared to the industry median of 5.2, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. AMB Financial Corp.’s shareholder yield is lower than its industry median ratio of 3.87%. Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. AMB Financial Corp.’s price-to-book ratio is lower than its industry median ratio of 0.94. This could make AMB Financial Corp. more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at AMB Financial Corp.’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. AMB Financial Corp.’s price-to-free-cash-flow ratio is lower than its industry median ratio of 9.26. This could make AMB Financial Corp. more attractive because the lower P/FCF ratio indicates that AMB Financial Corp. is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

Itau Unibanco Holding SA (ADR)’s Value Grade

Value Grade:

Itau Unibanco Holding S.A. is a holding company. The Company provides a range of financial products and services to individual and corporate clients in Brazil and abroad. The Company operates through three segments: Retail Banking, Wholesale Banking, and Activities with the Market + Corporation. The Retail Banking segment offers banking products and services to a diversified client base of account holders and non-account holders, individuals and companies. The Wholesale Banking segment offers products and services to middle-market companies, high-net worth clients (Private Banking) and institutional clients. The Company's Activities with the Market + Corporation segment mainly manages the financial results associated with capital surplus, subordinated debt, and net debt of tax credits and debits. The Company provides banking activities, through its commercial, investment, real estate loan, finance and investment credit, and lease portfolios, including foreign exchange operations.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Itau Unibanco Holding SA (ADR) has a Value Score of 77, which is considered to be undervalued.

Itau Unibanco Holding SA (ADR)’s price-earnings ratio is 9.3 compared to the industry median at 8.4. This means that it has a higher price relative to its earnings compared to its peers. This makes Itau Unibanco Holding SA (ADR) less attractive for value investors.

Itau Unibanco Holding SA (ADR)’s price-to-book ratio is lower than its peers. This could make Itau Unibanco Holding SA (ADR) more attractive for value investors when compared to the industry median at 0.94.

You can read more about Itau Unibanco Holding SA (ADR)’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Magyar Bancorp Inc’s Value Grade

Value Grade:

Magyar Bancorp, Inc. is a bank holding company of Magyar Bank (the Bank). It acts as an independent, community, financial services provider, and offers traditional banking and related financial services to individual, business, and government customers. It offers commercial and retail financial services, including the taking of time, savings, and demand deposits; the making of commercial, consumer and home equity loans; and the provision of other financial services. The Bank invests its deposits, together with funds generated from operations and wholesale funding, in residential mortgage loans, home equity loans, home equity lines of credit, commercial real estate loans, commercial business loans, small business administration (SBA) loans, construction loans and investment securities. It originates consumer loans, which consist primarily of secured demand loans. Its primary sources of funds are deposits, borrowings and principal and interest payments on loans and securities.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Magyar Bancorp Inc has a Value Score of 89, which is considered to be undervalued.

Magyar Bancorp Inc’s price-earnings ratio is 8.1 compared to the industry median at 8.4. This means that it has a lower price relative to its earnings compared to its peers. This makes Magyar Bancorp Inc more attractive for value investors.

Magyar Bancorp Inc’s price-to-book ratio is higher than its peers. This could make Magyar Bancorp Inc less attractive for value investors when compared to the industry median at 0.94.

You can read more about Magyar Bancorp Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

PacWest Bancorp’s Value Grade

Value Grade:

PacWest Bancorp is a bank holding company. The Company through its subsidiary, Pacific Western Bank, is focused on providing business banking and treasury management services to small, middle-market and venture-backed businesses. The Company operates through three segments: Commercial Banking, Civic Financial Services (Civic), and Others. Under Commercial Banking, its principal business activities are gathering retail and commercial deposits, originating and servicing loans and leases and investing in investment securities. Under Civic, the Company's principal business activity is the financing of business-purpose non-owner-occupied investor properties. The Company's loan and lease portfolio consists primarily of real estate mortgage loans, real estate construction and land loans, and commercial loans and leases. Its lending activities include real estate mortgage loans, real estate construction loans, commercial loans and leases, and purchased single-family residential mortgage loans.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

PacWest Bancorp has a Value Score of 74, which is considered to be undervalued.

PacWest Bancorp’s price-to-book ratio is higher than its peers. This could make PacWest Bancorp less attractive for value investors when compared to the industry median at 0.94.

You can read more about PacWest Bancorp’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Peoples Financial Corp’s Value Grade

Value Grade:

Peoples Financial Corporation is a bank holding company, which operates in the state of Mississippi through its subsidiary, The Peoples Bank, Biloxi, Mississippi (the Bank). The Bank's primary lending focus is to offer business loans, real estate loans, construction loans, personal loans and installment loans, with an emphasis on commercial lending. Its deposit services include interest bearing and non-interest bearing checking accounts, savings accounts, certificates of deposit, and individual retirement account (IRA) accounts. The Bank provides depository accounts to individuals, small and middle market businesses, and state, county and local government entities in its trade area at interest rates consistent with market conditions. The Bank also offers a variety of other services including safe deposit box rental, wire transfer services, night drop facilities, collection services, cash management and Internet banking. The Bank operates 17 branches along the Mississippi Gulf Coast.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Peoples Financial Corp has a Value Score of 87, which is considered to be undervalued.

Peoples Financial Corp’s price-earnings ratio is 4.9 compared to the industry median at 8.4. This means that it has a lower price relative to its earnings compared to its peers. This makes Peoples Financial Corp more attractive for value investors.

Peoples Financial Corp’s price-to-book ratio is lower than its peers. This could make Peoples Financial Corp more attractive for value investors when compared to the industry median at 0.94.

You can read more about Peoples Financial Corp’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Valley National Bancorp’s Value Grade

Value Grade:

Valley National Bancorp is a bank holding company and financial holding company. The Company?s principal subsidiary includes Valley National Bank (the Bank). It offers a full suite of national and regional banking solutions through various commercial, retail, insurance and wealth management financial services products. It provides personalized service and customized solutions to assist its customers with their financial service needs. Its solutions include, but are not limited to, traditional consumer and commercial deposit and lending products, commercial real estate financing, small business loans, equipment financings, insurance and wealth management financial services products, cash management solutions, and personal financing solutions, such as residential mortgages, home equity loans and automobile financing. It also offers niche financial services, including loan and deposit products for homeowners? associations, insurance premium financing and cannabis-related business banking.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Valley National Bancorp has a Value Score of 92, which is considered to be undervalued.

Valley National Bancorp’s price-earnings ratio is 7.5 compared to the industry median at 8.4. This means that it has a lower price relative to its earnings compared to its peers. This makes Valley National Bancorp more attractive for value investors.

Valley National Bancorp’s price-to-book ratio is higher than its peers. This could make Valley National Bancorp less attractive for value investors when compared to the industry median at 0.94.

You can read more about Valley National Bancorp’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Banks Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Banks stocks as well as other industrys.

Choosing Which of the 6 Best Banks Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• AMB Financial Corp. stock has a Value Grade of A.
• Itau Unibanco Holding SA (ADR) stock has a Value Grade of B.
• Magyar Bancorp Inc stock has a Value Grade of A.
• PacWest Bancorp stock has a Value Grade of B.
• Peoples Financial Corp stock has a Value Grade of A.
• Valley National Bancorp stock has a Value Grade of A.

Now that you have a bit more background about each of the 6 undervalued stocks in the Banks industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Banks Stocks

Want to learn more about Banks stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 6 Undervalued Banks Stocks for Friday, November 17
• 3 Undervalued Banks Stocks for Thursday, November 16
• Which Is a Better Investment, Seacoast Banking Corporation of Florida or TowneBank Stock?
• Why Capital City Bank Group, Inc.’s (CCBG) Stock Is Down 4.41%

AAII Disclaimer

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