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 Thursday, January 18, 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.

Benchmark Bankshares Inc’s Value Grade

Value Grade:

Benchmark Bankshares, Inc. is a holding company for Benchmark Community Bank (the Bank). The Bank is a full-service financial institution, which is focused on serving Southside Virginia and Northern North Carolina. Its deposit products include traditional savings accounts, holiday savings clubs, certificates of deposit, and individual retirement accounts. It also offers free financial consultations and investment and insurance services. Its commercial services include electronic funds transfer, direct deposit payroll service, positive pay and merchant services, and credit card processing. Its borrowing solutions include personal loans, mortgages, other real estate loans, business loans, auto loans, student loans, and credit cards. The Bank provides various wealth management solutions, such as financial solutions, financial planning, retirement planning, and portfolio management. It offers safe deposit boxes and wire transfers. The Bank also provides mobile banking 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.

Benchmark Bankshares Inc has a Value Score of 84, which is considered to be undervalued.

When you look at Benchmark Bankshares Inc’s price-to-sales ratio at 2.13 compared to the industry median at 2.05, this company has a higher price relative to revenue compared to its peers. This could make Benchmark Bankshares Inc’s stock less attractive for value investors.

Benchmark Bankshares Inc’s price-earnings ratio is 6.86 compared to the industry median at 9.22. This means it has a lower share price relative to earnings compared to its peers. This could make Benchmark Bankshares Inc more attractive for value investors.

Now, let’s assess Benchmark Bankshares Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 4.0, when compared to the industry median of 5.2, 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. Benchmark Bankshares Inc’s shareholder yield is lower than its industry median ratio of 3.56%. 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. Benchmark Bankshares Inc’s price-to-book ratio is higher than its industry median ratio of 1.00. This could make Benchmark Bankshares Inc less attractive to investors looking for a new addition to their portfolio.

Franklin Financial Services Corp’s Value Grade

Value Grade:

Franklin Financial Services Corporation is a bank holding company for Farmers and Merchants Trust Company of Chambersburg (the Bank). The Bank is engaged in general commercial, retail banking and trust services associated with community banks. It offers a range of banking services to businesses, individuals, and governmental entities. It provides a range of services, such as accepting and maintaining checking, savings, and time deposit accounts, providing investment and trust services, making loans and providing safe deposit facilities. It offers various deposit products including demand deposits (noninterest and interest-bearing accounts), savings, money management accounts, and time deposits to retail, commercial, and municipal customers. Its investment and trust services department offers all of the personal and corporate trust services associated with community bank trust departments, including estate planning and administration, and corporate and personal trust fund 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.

Franklin Financial Services Corp has a Value Score of 86, which is considered to be undervalued.

Franklin Financial Services Corp’s price-earnings ratio is 9.3 compared to the industry median at 9.2. This means that it has a higher price relative to its earnings compared to its peers. This makes Franklin Financial Services Corp less attractive for value investors.

Franklin Financial Services Corp’s price-to-book ratio is lower than its peers. This could make Franklin Financial Services Corp more attractive for value investors when compared to the industry median at 1.00.

You can read more about Franklin Financial Services 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.

Huntington Bancshares Incorporated’s Value Grade

Value Grade:

Huntington Bancshares Incorporated is a diversified regional bank holding company. The Company operates through two segments: Consumer & Regional Banking and Commercial Banking. The Consumer & Regional Banking segment provides financial products and services to consumer and business customers including, but not limited to, deposits, lending, payments, mortgage banking, dealer financing, investment management, trust, brokerage, insurance, and other financial products and services. It serves its customers through its network of channels, including branches, online banking, mobile banking, telephone banking, and automated teller machines (ATMs). The Commercial Banking segment provides expertise through bankers, capabilities, and digital channels, and includes a comprehensive set of product offerings. The Commercial Banking segment leverages internal partnerships for wealth management, trust, insurance, payments, and treasury management capabilities.

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.

Huntington Bancshares Incorporated has a Value Score of 83, which is considered to be undervalued.

Huntington Bancshares Incorporated’s price-earnings ratio is 8.1 compared to the industry median at 9.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Huntington Bancshares Incorporated more attractive for value investors.

Huntington Bancshares Incorporated’s price-to-book ratio is lower than its peers. This could make Huntington Bancshares Incorporated more attractive for value investors when compared to the industry median at 1.00.

You can read more about Huntington Bancshares Incorporated’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.

Northeast Bank’s Value Grade

Value Grade:

Northeast Bank (the Bank) is a full-service financial institution. The Bank gathers retail deposits through its seven full-service branches in Maine and through its online deposit program, ableBanking; purchase and originate commercial loans, typically secured by real estate, on a nationwide basis through its National Lending Division, and originate loans through the Community Banking Division and Small Business Administration (SBA) National Division. The National Lending Division purchases primarily performing commercial real estate loans, on a nationwide basis, typically at a discount from their unpaid principal balances. The National Lending Division also originates commercial real estate and commercial and industrial loans on a nationwide basis. The SBA National Division originates loans to small businesses to help provide funding opportunities nationally. The Community Banking Division originates loans directly to businesses located in its market area.

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.

Northeast Bank has a Value Score of 73, which is considered to be undervalued.

Northeast Bank’s price-earnings ratio is 7.6 compared to the industry median at 9.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Northeast Bank more attractive for value investors.

Northeast Bank’s price-to-book ratio is lower than its peers. This could make Northeast Bank more attractive for value investors when compared to the industry median at 1.00.

You can read more about Northeast Bank’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.

Northwest Bancshares Inc’s Value Grade

Value Grade:

Northwest Bancshares, Inc. is a bank holding company of Northwest Bank (the Bank). The Bank is a Pennsylvania-chartered stock savings bank. The Bank is a community-oriented financial institution offering personal and business banking solutions, investment management and trust services. Its principal lending activities include origination of loans secured by first mortgages on owner-occupied, one-to-four-family residences, shorter term consumer loans, and commercial business and commercial real estate loans. Its principal sources of funds are personal and business deposits, borrowed funds and the principal and interest payments on loans and marketable securities. The Bank has approximately 150 community-banking locations throughout its market area in Pennsylvania, western New York, eastern Ohio, and Indiana. Its other consumer loans include direct and indirect automobile loans, sales finance loans, unsecured personal loans, credit card loans, and loans secured by 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.

Northwest Bancshares Inc has a Value Score of 72, which is considered to be undervalued.

Northwest Bancshares Inc’s price-earnings ratio is 10.8 compared to the industry median at 9.2. This means that it has a higher price relative to its earnings compared to its peers. This makes Northwest Bancshares Inc less attractive for value investors.

Northwest Bancshares Inc’s price-to-book ratio is lower than its peers. This could make Northwest Bancshares Inc fairly attractive for value investors when compared to the industry median at 1.00.

You can read more about Northwest Bancshares 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.

Seneca Financial Corp’s Value Grade

Value Grade:

Seneca Financial Corp. is a holding company for Seneca Federal Savings and Loan Association (the Bank). The Bank is a community-oriented savings and loan institution whose business primarily consists of accepting deposits from customers within its market area and investing those funds primarily in residential mortgage and commercial loans. The Company’s personal banking services include loans, deposit accounts, investment services, and managing wealth and planning for retirement. Its online banking services include business banking, business deposit accounts, business loans and online 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.

Seneca Financial Corp has a Value Score of 79, which is considered to be undervalued.

Seneca Financial Corp’s price-earnings ratio is 13.5 compared to the industry median at 9.2. This means that it has a higher price relative to its earnings compared to its peers. This makes Seneca Financial Corp less attractive for value investors.

Seneca Financial Corp’s price-to-book ratio is higher than its peers. This could make Seneca Financial Corp less attractive for value investors when compared to the industry median at 1.00.

You can read more about Seneca 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.

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 77, which is considered to be undervalued.

Washington Trust Bancorp Inc’s price-earnings ratio is 9.6 compared to the industry median at 9.2. 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 1.00.

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.

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.

• Benchmark Bankshares Inc stock has a Value Grade of A.
• Franklin Financial Services Corp stock has a Value Grade of A.
• Huntington Bancshares Incorporated stock has a Value Grade of A.
• Northeast Bank stock has a Value Grade of B.
• Northwest Bancshares Inc stock has a Value Grade of B.
• Seneca Financial Corp stock has a Value Grade of B.
• Washington Trust Bancorp Inc stock has a Value Grade of B.

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 Thursday, January 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 Ameris Bancorp's Q3 Earnings

AAII Disclaimer

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