Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 3 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.

3 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 3 undervalued stocks in the Banks industry for Tuesday, January 02, 2024. 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.

Exchange Bank’s Value Grade

Value Grade:

Exchange Bank (the Bank) is a full-service community bank. The Bank provides a range of personal, commercial and trust and investment management services with over 16 retail branches in Sonoma County, a commercial branch in Roseville and Trust & Investment Management offices in Santa Rosa, Roseville and Silicon Valley. The Bank's personal banking products and services include checking, savings, personal loans, home loans and credit cards. The Bank's business banking products and services include checking, savings, loans, credit cards and merchant services. Its services include trust administration, investment management, retirement accounts and estate settlement.

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.

Exchange Bank has a Value Score of 91, which is considered to be undervalued.

When you look at Exchange Bank’s price-to-sales ratio at 1.54 compared to the industry median at 2.12, this company has a lower price relative to revenue compared to its peers. This could make Exchange Bank’s stock more attractive for value investors.

Exchange Bank’s price-earnings ratio is 7.51 compared to the industry median at 9.58. This means it has a lower share price relative to earnings compared to its peers. This could make Exchange Bank more 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. Exchange Bank’s shareholder yield is higher than its industry median ratio of 3.46%. 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. Exchange Bank’s price-to-book ratio is lower than its industry median ratio of 1.02. This could make Exchange Bank more attractive to investors looking for a new addition to their portfolio.

Pioneer Bancorp Inc’s Value Grade

Value Grade:

Pioneer Bancorp, Inc. operates principally through its wholly owned subsidiary, Pioneer Bank (the Bank), a New York state chartered savings bank. The Bank operates approximately 22 retail banking offices in Albany, Greene, Rensselaer, Saratoga, Schenectady and Warren Counties in New York. The Company accepts deposits from the general public and municipalities and uses those funds along with advances from the Federal Home Loan Bank of New York and funds generated from operations to originate commercial real estate loans, commercial and industrial loans, commercial construction loans and home equity loans and lines of credit and, to a lesser extent, consumer loans. It also invests in securities, which consist primarily of U.S. Government and agency obligations, municipal obligations and Federal Home Loan Bank of New York stock. It also offers a variety of deposit accounts, including demand accounts, savings accounts, money market accounts and certificate of deposit accounts.

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.

Pioneer Bancorp Inc has a Value Score of 70, which is considered to be undervalued.

Pioneer Bancorp Inc’s price-earnings ratio is 12.5 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 Pioneer Bancorp Inc less attractive for value investors.

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

You can read more about Pioneer 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.

Trustmark Corp’s Value Grade

Value Grade:

Trustmark Corporation is a bank holding company. The Company's principal subsidiary is Trustmark National Bank (TNB). Through TNB and its subsidiaries, the Company operates as a financial services company providing banking and other financial solutions. The Company operates through three segments: General Banking, Wealth Management and Insurance. The General Banking Segment is responsible for all traditional banking products and services, including loans and deposits. The Wealth Management Segment provides customized solutions for customers by integrating financial services with traditional banking products and services, such as money management, full-service brokerage, financial planning, personal and institutional trust and retirement services. Through Fisher Brown Bottrell Insurance, Inc. (FBBI), a subsidiary of TNB, the Insurance Segment provides a range of retail insurance products, including commercial risk management products, bonding, group benefits and personal lines coverage.

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.

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

Trustmark Corp’s price-earnings ratio is 17.9 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 Trustmark Corp less attractive for value investors.

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

You can read more about Trustmark 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 3 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.

• Exchange Bank stock has a Value Grade of A.
• Pioneer Bancorp Inc stock has a Value Grade of B.
• Trustmark Corp stock has a Value Grade of B.

Now that you have a bit more background about each of the 3 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.

• 3 Undervalued Banks Stocks for Tuesday, January 02
• 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.