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 Monday, December 18, 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.

ANZ Group Holdings Ltd (ADR)’s Value Grade

Value Grade:

ANZ Group Holdings Limited is a non-operating holding company. It operates in six divisions: Australia Retail, Australia Commercial, Institutional, New Zealand, Pacific, and Group Center. The Australia Retail division offers a range of banking services, such as home loans, deposits, credit cards and personal loans. It also offers digital and Internet banking and phone banking. The Australia Commercial division provides a full range of banking products and financial services, including asset financing, across customer segments: small business owners and medium commercial customers. The Institutional division services government, global institutional and corporate customers across Australia, New Zealand and International. The New Zealand division provides personal banking and wealth management services. The Pacific division provides retail products for traditional relationship banking. The Group center supports the operating divisions, including technology, property, and risk management.

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.

ANZ Group Holdings Ltd (ADR) has a Value Score of 69, which is considered to be undervalued.

When you look at ANZ Group Holdings Ltd (ADR)’s price-to-sales ratio at 1.53 compared to the industry median at 2.11, this company has a lower price relative to revenue compared to its peers. This could make ANZ Group Holdings Ltd (ADR)’s stock more attractive for value investors.

ANZ Group Holdings Ltd (ADR)’s price-earnings ratio is 11.19 compared to the industry median at 9.55. This means it has a higher share price relative to earnings compared to its peers. This could make ANZ Group Holdings Ltd (ADR) less attractive for value investors.

Now, let’s assess ANZ Group Holdings Ltd (ADR)’s EV/EBITDA ratio, also known as enterprise multiple. At 0.5, when compared to the industry median of 5.1, 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. ANZ Group Holdings Ltd (ADR)’s shareholder yield is lower than its industry median ratio of 3.47%. 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. ANZ Group Holdings Ltd (ADR)’s price-to-book ratio is higher than its industry median ratio of 1.02. This could make ANZ Group Holdings Ltd (ADR) less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at ANZ Group Holdings Ltd (ADR)’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. ANZ Group Holdings Ltd (ADR)’s price-to-free-cash-flow ratio is higher than its industry median ratio of 10.52. This could make ANZ Group Holdings Ltd (ADR) less attractive because the higher P/FCF ratio indicates that ANZ Group Holdings Ltd (ADR) 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.

Chesapeake Financial Shares Inc’s Value Grade

Value Grade:

Chesapeake Financial Shares, Inc. is a bank holding company. The Company's principal business activity consists of ownership in Chesapeake Bank (the Bank) and Chesapeake Wealth Management, Inc. (CWM). The Bank is a full-service lender and provider of deposit services to individuals and businesses. The Bank operates approximately 16 branches in the Northern Neck, Middle Peninsula, Williamsburg and Richmond. The Bank offers mortgage, commercial, and consumer loans to its customers. Its loan portfolio includes commercial loans, such as non-real estate, commercial real estate, consumer non-real estate, and residential real estate. Its securities available for sale include securities of state and political subdivisions, mortgage-backed securities, and other debt securities. CWM is an independent wealth management firm offering brokerage, trust, and estate management services.

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.

Chesapeake Financial Shares Inc has a Value Score of 83, which is considered to be undervalued.

Chesapeake Financial Shares Inc’s price-earnings ratio is 6.6 compared to the industry median at 9.5. This means that it has a lower price relative to its earnings compared to its peers. This makes Chesapeake Financial Shares Inc more attractive for value investors.

Chesapeake Financial Shares Inc’s price-to-book ratio is lower than its peers. This could make Chesapeake Financial Shares Inc fairly attractive for value investors when compared to the industry median at 1.02.

You can read more about Chesapeake Financial Shares 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.

Premier Financial Corp (OHIO)’s Value Grade

Value Grade:

Premier Financial Corp. is a bank holding company that conducts business through its wholly-owned subsidiaries, Premier Bank (the Bank). The Bank is primarily engaged in community banking. The Bank attracts deposits from the general public through its offices and website, and uses those and other available sources of funds to originate residential real estate loans, commercial real estate loans, commercial loans, home improvement and home equity loans and consumer loans. In addition, the Bank invests in United States Treasury and federal government agency obligations, obligations of states and political subdivisions, mortgage-backed securities that are issued by federal agencies, including real estate mortgage investment conduits (REMICs) and residential collateralized mortgage obligations (CMOs), and corporate bonds. The Bank conducts its operations through approximately 74 full-service banking center offices, 12 loan offices and two wealth offices.

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.

Premier Financial Corp (OHIO) has a Value Score of 75, which is considered to be undervalued.

Premier Financial Corp (OHIO)’s price-earnings ratio is 7.2 compared to the industry median at 9.5. This means that it has a lower price relative to its earnings compared to its peers. This makes Premier Financial Corp (OHIO) more attractive for value investors.

Premier Financial Corp (OHIO)’s price-to-book ratio is higher than its peers. This could make Premier Financial Corp (OHIO) less attractive for value investors when compared to the industry median at 1.02.

You can read more about Premier Financial Corp (OHIO)’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.

Plumas Bancorp’s Value Grade

Value Grade:

Plumas Bancorp is a bank holding company, which operates through, Plumas Bank (the Bank). The Bank is a state-chartered bank, which primary service in the Northeastern portion of California, with Lake Tahoe to the south and the Oregon border to the north, and the Northwestern portion of Nevada. The Bank primarily is engaged in providing loans and investment securities. The Banks principal commercial lending services include term real estate, commercial and industrial term loans. In addition, the Bank provides agricultural loans, as well as credit lines. The Banks principal retail lending services include consumer, automobile and home equity loans. The Bank provides land development and construction loans on a limited basis. The Bank has 14 branch networks and 18 automated teller machines. In addition to its branch network, the Bank operates a lending office in Auburn, California and commercial/agricultural lending offices located in Chico, California and Klamath Falls, Oregon.

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.

Plumas Bancorp has a Value Score of 78, which is considered to be undervalued.

Plumas Bancorp’s price-earnings ratio is 7.9 compared to the industry median at 9.5. This means that it has a lower price relative to its earnings compared to its peers. This makes Plumas Bancorp more attractive for value investors.

Plumas Bancorp’s price-to-book ratio is lower than its peers. This could make Plumas Bancorp more attractive for value investors when compared to the industry median at 1.02.

You can read more about Plumas 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.

UMB Financial Corp’s Value Grade

Value Grade:

UMB Financial Corporation is a financial services company. The Company offers commercial banking, which includes comprehensive deposit, lending and investment services, personal banking, which includes wealth management and financial planning services, and institutional banking, which includes asset servicing, corporate trust solutions, investment banking, and healthcare services. It operates through three segments. Commercial Banking segment serves the commercial banking and treasury management needs of the Company?s small to middle-market businesses through a range of products and services. Institutional Banking segment is a combination of banking services, fund services, asset management services and healthcare services provided to institutional clients. Personal Banking segment combines consumer banking and wealth management services offered to clients and delivered through personal relationships and its bank branches, automated teller machine (ATM) network and Internet 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.

UMB Financial Corp has a Value Score of 72, which is considered to be undervalued.

UMB Financial Corp’s price-earnings ratio is 10.7 compared to the industry median at 9.5. This means that it has a higher price relative to its earnings compared to its peers. This makes UMB Financial Corp less attractive for value investors.

UMB Financial Corp’s price-to-book ratio is lower than its peers. This could make UMB Financial Corp more attractive for value investors when compared to the industry median at 1.02.

You can read more about UMB 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 86, which is considered to be undervalued.

Valley National Bancorp’s price-earnings ratio is 9.6 compared to the industry median at 9.5. This means that it has a higher price relative to its earnings compared to its peers. This makes Valley National Bancorp less 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 1.02.

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.

• ANZ Group Holdings Ltd (ADR) stock has a Value Grade of B.
• Chesapeake Financial Shares Inc stock has a Value Grade of A.
• Premier Financial Corp (OHIO) stock has a Value Grade of B.
• Plumas Bancorp stock has a Value Grade of B.
• UMB Financial Corp stock has a Value Grade of B.
• 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.

• 5 Undervalued Banks Stocks for Monday, December 18
• 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

AAII Disclaimer

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