Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 5 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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5 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 5 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.

Richmond Mutual Bancorporation Inc’s Value Grade

Value Grade:

Richmond Mutual Bancorporation, Inc. is a holding company for First Bank Richmond. Its principal business consists of attracting deposits from the general public, as well as brokered deposits, and investing those funds primarily in loans secured by commercial and multi-family real estate, first mortgages on owner-occupied, one- to four-family residences. It also provides a range of consumer loans, direct financing leases and commercial and industrial loans. It offers a range of lending products, including multi-family and commercial real estate loans, including owner and nonowner-occupied real estate loans; commercial and industrial loans, including equipment loans and working capital lines of credit; construction and development loans; residential real estate loans, including home equity loans and lines of credit, and consumer loans. It also engages in lease financing, which consists of direct financing leases and is used by its commercial customers to finance purchases of equipment.

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.

Richmond Mutual Bancorporation Inc has a Value Score of 74, which is considered to be undervalued.

When you look at Richmond Mutual Bancorporation Inc’s price-to-sales ratio at 1.91 compared to the industry median at 2.11, this company has a lower price relative to revenue compared to its peers. This could make Richmond Mutual Bancorporation Inc’s stock more attractive for value investors.

Richmond Mutual Bancorporation Inc’s price-earnings ratio is 11.41 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 Richmond Mutual Bancorporation Inc less attractive for value investors.

Now, let’s assess Richmond Mutual Bancorporation Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 5.5, when compared to the industry median of 5.1, the company may be considered overvalued 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. Richmond Mutual Bancorporation Inc’s shareholder yield is higher 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. Richmond Mutual Bancorporation Inc’s price-to-book ratio is higher than its industry median ratio of 1.02. This could make Richmond Mutual Bancorporation Inc fairly attractive to investors looking for a new addition to their portfolio.

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

Renasant Corp’s Value Grade

Value Grade:

Renasant Corporation owns and operates Renasant Bank. The Company has three segments. Community Banks segment delivers a complete range of banking and financial services to individuals and small to medium-sized businesses, including checking and savings accounts, business and personal loans, asset-based lending, factoring and equipment leasing, as well as safe deposit and night depository facilities. Insurance segment includes a full-service insurance agency offering all various commercial and personal insurance through various carriers. Wealth Management segment, through the Trust division, offers a range of fiduciary services, including the administration of benefit plans, management of trust accounts, inclusive of personal and corporate benefit accounts and custodial accounts, as well as accounting and money management for trust accounts. The segment, through the Financial Services division, provides fixed and variable annuities, mutual funds and other investment 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.

Renasant Corp has a Value Score of 67, which is considered to be undervalued.

Renasant Corp’s price-earnings ratio is 11.5 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 Renasant Corp less attractive for value investors.

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

You can read more about Renasant 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.

SouthState Corp’s Value Grade

Value Grade:

SouthState Corporation is a financial holding company. The Company offers a range of banking services and products to its customers through its wholly owned bank subsidiary, South State Bank, National Association (the Bank). The Bank provides consumer, commercial, mortgage and wealth management solutions. The Bank's loan portfolio includes commercial real estate loans, residential real estate loans, commercial and industrial loans, and consumer loans. It also offers its customers a variety of deposit products and services, including checking accounts, savings accounts, other deposit accounts and treasury and merchant services, through multiple channels, including its network of approximately 251 full-service branches and online, mobile and telephone banking platforms. Through Corporate Billing, LLC, the Bank provides factoring, invoicing, collection, and accounts receivable management services to transportation companies and automotive parts and service providers.

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.

SouthState Corp has a Value Score of 66, which is considered to be undervalued.

SouthState Corp’s price-earnings ratio is 12.5 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 SouthState Corp less attractive for value investors.

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

You can read more about SouthState 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.

Washington Trust Bancorp Inc’s Value Grade

Value Grade:

Washington Trust Bancorp, Inc. is a bank holding company of The Washington Trust Company, of Westerly (the Bank). The Company operates through two segments: Commercial Banking and Wealth Management Services. The Commercial Banking segment includes commercial, residential and consumer lending activities, mortgage banking activities, deposit generation, cash management activities, and banking activities, including customer support and the operation of automated teller machines (ATMs), telephone banking, Internet banking and mobile banking services, as well as investment portfolio and wholesale funding activities. The Wealth Management Services segment includes investment management, holistic financial planning services, personal trust and estate services, including services as trustee, personal representative, custodian and guardian, settlement of decedents? estates, and institutional trust services, including custody and fiduciary 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.

Washington Trust Bancorp Inc has a Value Score of 73, which is considered to be undervalued.

Washington Trust Bancorp Inc’s price-earnings ratio is 10.6 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 Washington Trust Bancorp Inc less attractive for value investors.

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

You can read more about Washington Trust 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.

Westbury Bancorp Inc’s Value Grade

Value Grade:

Westbury Bancorp, Inc. is the holding company for Westbury Bank (the Bank). The Bank is an independent community bank serving communities in Washington and Waukesha Counties through its eight banking offices providing deposit and loan services to individuals, professionals, and businesses throughout its markets. The Bank provides checking, savings, certificates of deposit, consumer loans, credit cards, individual retirement accounts, and others. The Bank’s services include online banking, mobile banking, bill pay, Pop Money, order checks, and e-statements, among others. The Bank’s business services include business checking and treasury management. The Bank’s commercial loans category includes commercial real estate, lines of credit, equipment, construction, working capital, acquisitions, letters of credit, and SBAs. The Bank offers an array of home loan options, including purchase, refinance, construction, Federal VA, WHEDA, and home equity loans and lines of credit.

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.

Westbury Bancorp Inc has a Value Score of 90, which is considered to be undervalued.

Westbury Bancorp Inc’s price-earnings ratio is 6.8 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 Westbury Bancorp Inc more attractive for value investors.

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

You can read more about Westbury 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.

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 5 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.

• Richmond Mutual Bancorporation Inc stock has a Value Grade of B.
• Renasant Corp stock has a Value Grade of B.
• SouthState Corp stock has a Value Grade of B.
• Washington Trust Bancorp Inc stock has a Value Grade of B.
• Westbury Bancorp Inc stock has a Value Grade of A.

Now that you have a bit more background about each of the 5 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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