Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 7 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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7 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 7 undervalued stocks in the Banks industry for Tuesday, December 12, 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.

Citizens Holding Company’s Value Grade

Value Grade:

Citizens Holding Company is a one-bank holding company of The Citizens Bank of Philadelphia (the Bank). It engages in commercial and personal banking activities, including accepting demand deposits, savings and time deposit accounts, making secured and unsecured loans, issuing letters of credit, originating mortgage loans, and providing personal and corporate trust services. The Bank has over 24 banking locations in 14 counties throughout the state of Mississippi. In addition to full service commercial banking, it offers mortgage loans, title insurance services through third party partnerships and a range of Internet banking services, including online banking, bill pay and cash management services for businesses. It also provides certain services that are closely related to commercial banking, such as credit life insurance and title insurance for its loan customers through third-party relationships. Internet services are available at the Bank website, www.thecitizensbankphila.com.

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.

Citizens Holding Company has a Value Score of 64, which is considered to be undervalued.

When you look at Citizens Holding Company’s price-to-sales ratio at 1.17 compared to the industry median at 2.01, this company has a lower price relative to revenue compared to its peers. This could make Citizens Holding Company’s stock more attractive for value investors.

Citizens Holding Company’s price-earnings ratio is 10.48 compared to the industry median at 8.98. This means it has a higher share price relative to earnings compared to its peers. This could make Citizens Holding Company less attractive for value investors.

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. Citizens Holding Company’s shareholder yield is higher than its industry median ratio of 3.59%. 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. Citizens Holding Company’s price-to-book ratio is higher than its industry median ratio of 0.97. This could make Citizens Holding Company less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Citizens Holding Company’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Citizens Holding Company’s price-to-free-cash-flow ratio is higher than its industry median ratio of 9.85. This could make Citizens Holding Company less attractive because the higher P/FCF ratio indicates that Citizens Holding Company 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.

First Foundation Inc’s Value Grade

Value Grade:

First Foundation Inc. is a financial services company. The Company provides a platform of financial services to individuals, businesses and other organizations. The Company conducts its operations through its subsidiaries, First Foundation Advisors (FFA) and First Foundation Bank (FFB), and FFB?s wholly owned subsidiaries, First Foundation Insurance Services (FFIS), First Foundation Public Finance (FFPF) and Blue Moon Management, LLC. It operates through two segments: Banking and Wealth Management. Its Banking segment includes the operations of FFB, FFIS, FFPF, and Blue Moon Management LLC and Wealth Management segment includes the operations of FFA. FFB offers a range of loan products, deposit products, treasury management products and services, and trust services. FFA offers investment advisory and wealth management services primarily to individuals and their families, family businesses and other affiliated organizations. It operates in California, Nevada, Florida, Texas, and Hawaii.

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.

First Foundation Inc has a Value Score of 77, which is considered to be undervalued.

First Foundation Inc’s price-to-book ratio is higher than its peers. This could make First Foundation Inc less attractive for value investors when compared to the industry median at 0.97.

You can read more about First Foundation 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.

Independent Bank Corp (Michigan)’s Value Grade

Value Grade:

Independent Bank Corporation is a bank holding company for Independent Bank (the Bank). The Bank provides a full range of financial services, including commercial banking, mortgage lending, investments and insurance. It offers a range of banking services to individuals and businesses, including checking and savings accounts, commercial lending, direct and indirect consumer financing, mortgage lending, and safe deposit box services. The Bank serves rural and suburban communities across Lower Michigan with a total of approximately 56 branches, two drive-thru facilities, and over five Michigan-based loan production offices. The Bank's branches provide full-service lobby and drive-thru services, as well as automatic teller machines (ATMs). The Bank also provide Internet and mobile banking capabilities to its customers. In addition to general banking services, it also offers title insurance services and investment services through a third-party agreement with Cetera Investment Services LLC.

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.

Independent Bank Corp (Michigan) has a Value Score of 76, which is considered to be undervalued.

Independent Bank Corp (Michigan)’s price-earnings ratio is 8.2 compared to the industry median at 9.0. This means that it has a lower price relative to its earnings compared to its peers. This makes Independent Bank Corp (Michigan) more attractive for value investors.

Independent Bank Corp (Michigan)’s price-to-book ratio is lower than its peers. This could make Independent Bank Corp (Michigan) more attractive for value investors when compared to the industry median at 0.97.

You can read more about Independent Bank Corp (Michigan)’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.

New Peoples Bankshares Inc’s Value Grade

Value Grade:

New Peoples Bankshares, Inc. is a financial holding company. The Company?s business is conducted primarily through New Peoples Bank, Inc. (the Bank), a banking corporation. The Bank has a division doing business as New Peoples Financial Services, which offers investment services. The Bank offers a range of banking and related financial services focused primarily on serving individuals, small to medium size businesses and the professional community. It offers various banking services, including Commercial Loans, Residential Mortgage Loans, Construction Loans, Consumer Loans, Deposits, Investment Services and Other Bank Services. It offers a full range of short-medium- and longer-term commercial, 1-4 family residential mortgages and personal loans. Its commercial loans include both secured and unsecured loans for working capital, including inventory and receivables; business expansion, including acquisition of real estate and improvements; and purchase of equipment and machinery.

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.

New Peoples Bankshares Inc has a Value Score of 92, which is considered to be undervalued.

New Peoples Bankshares Inc’s price-earnings ratio is 7.4 compared to the industry median at 9.0. This means that it has a lower price relative to its earnings compared to its peers. This makes New Peoples Bankshares Inc more attractive for value investors.

New Peoples Bankshares Inc’s price-to-book ratio is lower than its peers. This could make New Peoples Bankshares Inc fairly attractive for value investors when compared to the industry median at 0.97.

You can read more about New Peoples Bankshares 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.

Swedbank AB (ADR)’s Value Grade

Value Grade:

Swedbank AB is a savings bank. The Company offers financial services and products in its home markets of Sweden, Estonia, Latvia and Lithuania. The Company's segments are Swedish Banking, Baltic Banking, Large corporates & Institutions, and Group Functions & Other. The Company offers products mainly in the areas of lending, payments and savings. The Swedish Banking segment offers its products to private customers and companies in the Swedish market. The Swedish Banking segment's services are sold through the Company's own branch network, the telephone Bank, the Internet Bank and the distribution network of the independent savings banks. The Baltic Banking segment offers its products to private customers and companies in Estonia, Latvia and Lithuania. The Baltic Banking segment's services are sold through its own branch network, the telephone Bank and the Internet Bank. The Large Corporates & Institutions segment offers its services to large companies and financial institutions.

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.

Swedbank AB (ADR) has a Value Score of 73, which is considered to be undervalued.

Swedbank AB (ADR)’s price-earnings ratio is 6.9 compared to the industry median at 9.0. This means that it has a lower price relative to its earnings compared to its peers. This makes Swedbank AB (ADR) more attractive for value investors.

Swedbank AB (ADR)’s price-to-book ratio is lower than its peers. This could make Swedbank AB (ADR) more attractive for value investors when compared to the industry median at 0.97.

You can read more about Swedbank AB (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.

First Financial Corp’s Value Grade

Value Grade:

First Financial Corporation is a financial holding company. The Company offers a variety of financial services, including commercial, mortgage and consumer lending, lease financing, trust account services, depositor services and insurance services, through its two subsidiaries, which include First Financial Bank, N.A. (the Bank), and FFB Risk Management Co., Inc. The Bank has two investment subsidiaries, Portfolio Management Specialists A (Specialists A) and Portfolio Management Specialists B (Specialists B), which hold and manages certain assets to manage various income streams and provides opportunities for capital creation as needed. The Bank's loan portfolio includes commercial loans, residential loans, and consumer loans. Its deposits include non-interest-bearing demand deposits, interest-bearing demand deposits, savings deposits, time deposits and other time deposits. The consumer portfolio primarily consists of home equity loans and lines, secured loans and unsecured 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.

First Financial Corp has a Value Score of 90, which is considered to be undervalued.

First Financial Corp’s price-earnings ratio is 7.5 compared to the industry median at 9.0. This means that it has a lower price relative to its earnings compared to its peers. This makes First Financial Corp more attractive for value investors.

First Financial Corp’s price-to-book ratio is lower than its peers. This could make First Financial Corp fairly attractive for value investors when compared to the industry median at 0.97.

You can read more about First 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.

Versailles Financial Corp’s Value Grade

Value Grade:

Versailles Financial Corporation is a thrift holding company. The Company is the holding company of Versailles Savings and Loan Company (Association). The Association is an Ohio chartered savings and loan company engaged primarily in the business of making residential mortgage loans and accepting checking, savings and time deposit accounts. The Company operates through banking segment. The Company primarily grants one- to four-family residential loans to customers located in Darke and the western half of Shelby counties. It also offers a range of loans, including commercial real estate loans. The Company's investment securities consist of Government sponsored entities residential mortgage-backed, which include Federal Home Loan Mortgage Corporation (FHLMC), Government National Mortgage Association (GNMA) and Federal National Mortgage Association (FNMA). The Company offers interest bearing time deposits. Its operations are conducted through its only office located in Versailles, Ohio.

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.

Versailles Financial Corp has a Value Score of 81, which is considered to be undervalued.

Versailles Financial Corp’s price-earnings ratio is 9.3 compared to the industry median at 9.0. This means that it has a higher price relative to its earnings compared to its peers. This makes Versailles Financial Corp less attractive for value investors.

Versailles Financial Corp’s price-to-book ratio is higher than its peers. This could make Versailles Financial Corp less attractive for value investors when compared to the industry median at 0.97.

You can read more about Versailles 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.

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 7 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.

• Citizens Holding Company stock has a Value Grade of B.
• First Foundation Inc stock has a Value Grade of B.
• Independent Bank Corp (Michigan) stock has a Value Grade of B.
• New Peoples Bankshares Inc stock has a Value Grade of A.
• Swedbank AB (ADR) stock has a Value Grade of B.
• First Financial Corp stock has a Value Grade of A.
• Versailles Financial Corp stock has a Value Grade of A.

Now that you have a bit more background about each of the 7 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.

• 7 Undervalued Banks Stocks for Tuesday, December 12
• What You Need to Know About 1st Source Corp's Q3 Earnings
• What You Need to Know About Alerus Financial Corp's Q3 Earnings
• What You Need to Know About Amalgamated Bank's Q3 Earnings

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