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.

Click the button below to learn more about A+ Investor and subscribe today.

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 26, 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.

ACNB Corporation’s Value Grade

Value Grade:

ACNB Corporation is a financial holding company. The Company's banking operations are conducted through its subsidiary, ACNB Bank (the Bank). The ACNB Bank serves its marketplace with banking and wealth management services, including trust and retail brokerage with a network of approximately 26 community banking offices and three loan offices located in the Pennsylvania counties of Adams, Cumberland, Franklin, Lancaster and York, and the Maryland counties of Baltimore, Carroll, and Frederick. The Company operates through two segments: Banking and Insurance. Its Banking segment includes the Bank and related financial services that the Corporation offers through its banking subsidiary. The Company?s subsidiary, ACNB Insurance Services, Inc., is a full-service agency, which offers a range of property, casualty, health, life, and disability insurance serving personal and commercial clients through office locations in Westminster and Jarrettsville, Maryland, and Gettysburg, Pennsylvania.

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.

ACNB Corporation has a Value Score of 67, which is considered to be undervalued.

When you look at ACNB Corporation’s price-to-sales ratio at 4.14 compared to the industry median at 2.13, this company has a higher price relative to revenue compared to its peers. This could make ACNB Corporation’s stock less attractive for value investors.

ACNB Corporation’s price-earnings ratio is 10.55 compared to the industry median at 9.64. This means it has a higher share price relative to earnings compared to its peers. This could make ACNB Corporation less attractive for value investors.

Now, let’s assess ACNB Corporation’s EV/EBITDA ratio, also known as enterprise multiple. At 4.9, 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. ACNB Corporation’s shareholder yield is lower than its industry median ratio of 3.40%. 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. ACNB Corporation’s price-to-book ratio is higher than its industry median ratio of 1.03. This could make ACNB Corporation less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at ACNB Corporation’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. ACNB Corporation’s price-to-free-cash-flow ratio is higher than its industry median ratio of 10.82. This could make ACNB Corporation less attractive because the higher P/FCF ratio indicates that ACNB Corporation 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.

Berkshire Hills Bancorp Inc’s Value Grade

Value Grade:

Berkshire Hills Bancorp, Inc. is a holding company for Berkshire Bank (the Bank). The Bank is engaged in providing business and consumer banking, mortgage, wealth management, and investment services. The Bank's loan portfolio consists of commercial real estate loan, commercial and industrial loans (C&I;), residential mortgages loan, and consumer loans. The Bank offers a variety of deposit accounts with a range of interest rates and terms. The Bank?s deposit accounts consist of demand deposits (non-interest-bearing checking), NOW (interest-bearing checking), regular savings, money market savings, and time certificates of deposit. Its Wealth Management Group provides consultative investment management, trust administration, and financial planning to individuals, businesses, and institutions. It also offers interest rate swaps to commercial loan customers and backs these swaps with offsetting swaps. It serves approximately 100 full-service financial centers its New England and New York.

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.

Berkshire Hills Bancorp Inc has a Value Score of 83, which is considered to be undervalued.

Berkshire Hills Bancorp Inc’s price-earnings ratio is 10.8 compared to the industry median at 9.6. This means that it has a higher price relative to its earnings compared to its peers. This makes Berkshire Hills Bancorp Inc less attractive for value investors.

Berkshire Hills Bancorp Inc’s price-to-book ratio is lower than its peers. This could make Berkshire Hills Bancorp Inc more attractive for value investors when compared to the industry median at 1.03.

You can read more about Berkshire Hills 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.

Muncy Columbia Financial Corp’s Value Grade

Value Grade:

Muncy Columbia Financial Corporation, formerly CCFNB Bancorp, Inc., is a financial holding company of Journey Bank (the Bank). The Bank provides full-service banking, including trust services, through the Bank, to individuals, municipalities, and corporate customers. The Bank acts as an independent community financial services provider and offers traditional banking and related financial services to individual, business and government customers. Through its branch, remote capture, Internet banking, telephone, mobile banking, and automated teller machine network, the Bank offers a full range of commercial and retail financial services, including the taking of time, savings and demand deposits; the making of commercial, consumer and mortgage loans; and the providing of other financial services. The Bank also performs personal, corporate, pension and fiduciary services through its B.B.C.T., Co. as well as offers diverse investment products through its investment center.

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.

Muncy Columbia Financial Corp has a Value Score of 63, which is considered to be undervalued.

Muncy Columbia Financial Corp’s price-earnings ratio is 10.0 compared to the industry median at 9.6. This means that it has a higher price relative to its earnings compared to its peers. This makes Muncy Columbia Financial Corp less attractive for value investors.

Muncy Columbia Financial Corp’s price-to-book ratio is higher than its peers. This could make Muncy Columbia Financial Corp less attractive for value investors when compared to the industry median at 1.03.

You can read more about Muncy Columbia 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.

Chemung Financial Corp.’s Value Grade

Value Grade:

Chemung Financial Corporation is a financial holding company, which operates through its subsidiaries, CFS Group, Inc. (the Bank) and Chemung Risk Management, Inc. (CRM). The Bank provides a range of financial services, including demand, savings and time deposits, commercial, residential and consumer loans, interest rate swaps, letters of credit, wealth management services, employee benefit plans, insurance products, and mutual funds and brokerage services. CRM is a captive insurance company, which insures against certain risks to the operations of the Company and its subsidiaries. The Company has two segments: core banking and WMG. The core banking segment provides attracts deposits from the general public and uses such funds to originate consumer, commercial, commercial real estate, and residential mortgage loans, primarily in the Company?s local markets, and to invest in securities. The WMG services segment provides trust and investment advisory services to clients.

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.

Chemung Financial Corp. has a Value Score of 80, which is considered to be undervalued.

Chemung Financial Corp.’s price-earnings ratio is 8.2 compared to the industry median at 9.6. This means that it has a lower price relative to its earnings compared to its peers. This makes Chemung Financial Corp. more attractive for value investors.

Chemung Financial Corp.’s price-to-book ratio is lower than its peers. This could make Chemung Financial Corp. more attractive for value investors when compared to the industry median at 1.03.

You can read more about Chemung 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.

Commerzbank AG (ADR)’s Value Grade

Value Grade:

Commerzbank is a Germany-based international commercial bank with branches and offices in nearly 50 countries. The Bank’s two business segments Private and Small-Business Customers and Corporate Clients offer a portfolio of financial services to their customers’ needs. The Bank offers its sector expertise to its corporate clients in Germany and abroad and is a provider of capital market products. Its subsidiary mBank in Poland is an digital bank. The integration of Comdirect enables Commerzbank to combine the services of Germany’s online banks with a personal advisory offering at local level. The Bank serves private and small-business customers nationwide and corporate clients, multinationals, financial service providers, and institutional clients worldwide. Its Polish subsidiary mBank S.A. operates in Poland, but also in the Czech Republic and Slovakia.

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.

Commerzbank AG (ADR) has a Value Score of 96, which is considered to be undervalued.

Commerzbank AG (ADR)’s price-earnings ratio is 6.4 compared to the industry median at 9.6. This means that it has a lower price relative to its earnings compared to its peers. This makes Commerzbank AG (ADR) more attractive for value investors.

Commerzbank AG (ADR)’s price-to-book ratio is higher than its peers. This could make Commerzbank AG (ADR) less attractive for value investors when compared to the industry median at 1.03.

You can read more about Commerzbank AG (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.

Ottawa Savings Bancorp Inc’s Value Grade

Value Grade:

Ottawa Savings Bancorp, Inc. is a savings and loan holding company. The Company serves as the holding company of Ottawa Savings Bank (The Bank). The Bank's business is to attract deposits from the general public and use those funds to originate and purchase one- to four-family, multi-family and non-residential real estate, construction, commercial and consumer loans, which the Bank primarily holds for investment. The Bank's loan portfolio consists primarily of one- to four-family residential mortgage loans. Its loan portfolio includes multi-family and non-residential real estate, commercial, construction and consumer loans. It invests in the liquid assets, including the United States Treasury obligations, securities of various federal agencies and of state and municipal governments, mortgage-backed securities and certificates of deposit of federally insured institutions. Deposits and loan repayments are the sources of the Bank's funds for lending and other investment purposes.

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.

Ottawa Savings Bancorp Inc has a Value Score of 84, which is considered to be undervalued.

Ottawa Savings Bancorp Inc’s price-earnings ratio is 13.9 compared to the industry median at 9.6. This means that it has a higher price relative to its earnings compared to its peers. This makes Ottawa Savings Bancorp Inc less attractive for value investors.

Ottawa Savings Bancorp Inc’s price-to-book ratio is higher than its peers. This could make Ottawa Savings Bancorp Inc less attractive for value investors when compared to the industry median at 1.03.

You can read more about Ottawa Savings 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.

Southern Michigan Bancorp Inc’s Value Grade

Value Grade:

Southern Michigan Bancorp, Inc. is a bank holding company and the parent company of Southern Michigan Bank & Trust (The Bank). The Bank operates about 18 branches within Branch, Calhoun, Hillsdale, Jackson, Kalamazoo, and St. Joseph counties, providing a range of consumer, business, and wealth management services throughout the region. Its business, which it conducts primarily through the Bank, is concentrated in a single industry segment, commercial banking. The Bank offers a variety of deposit, payment, credit, and other financial services to all types of customers. The Bank’s commercial lending covers categories, such as business, industrial, agricultural, construction, inventory, and real estate. It offers trust and investment services, which include investment management, trustee services, and others. It also owns Southern Michigan Bancorp Capital Trust I, SMB Risk Management, Inc., and 27 Marshall Street, LLC. The Bank wholly owns SMB Financial Services, Inc.

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.

Southern Michigan Bancorp Inc has a Value Score of 95, which is considered to be undervalued.

Southern Michigan Bancorp Inc’s price-earnings ratio is 6.0 compared to the industry median at 9.6. This means that it has a lower price relative to its earnings compared to its peers. This makes Southern Michigan Bancorp Inc more attractive for value investors.

Southern Michigan Bancorp Inc’s price-to-book ratio is higher than its peers. This could make Southern Michigan Bancorp Inc less attractive for value investors when compared to the industry median at 1.03.

You can read more about Southern Michigan 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 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.

• ACNB Corporation stock has a Value Grade of B.
• Berkshire Hills Bancorp Inc stock has a Value Grade of A.
• Muncy Columbia Financial Corp stock has a Value Grade of B.
• Chemung Financial Corp. stock has a Value Grade of B.
• Commerzbank AG (ADR) stock has a Value Grade of A.
• Ottawa Savings Bancorp Inc stock has a Value Grade of A.
• Southern Michigan Bancorp Inc 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 26
• 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

We make no representations or warranties that any investor will, or is likely to, achieve profits similar to those shown, because past, hypothetical or simulated performance is not necessarily indicative of future results. Before making an investment decision, you should consider your circumstances and whether the information on our content is applicable to your situation. This information was prepared in good faith and we accept no liability for any errors or omissions. The full disclaimer can be read here.