Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 4 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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4 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 4 undervalued stocks in the Banks industry for Wednesday, January 31, 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.

Consumers Bancorp, Inc.’s Value Grade

Value Grade:

Consumers Bancorp, Inc. is a bank holding company for Consumers National Bank (the Bank). The Company is engaged in the business of commercial and retail banking. The Bank’s business involves attracting deposits from businesses and individual customers and using such deposits to originate commercial, mortgage and consumer loans in its primary market area. The Bank also invests in securities consisting primarily of United States government-sponsored entities, municipal obligations, mortgage-backed and collateralized mortgage obligations issued by Fannie Mae, Freddie Mac and Ginnie Mae. Its deposit products include business and personal savings accounts, negotiable order of withdrawal accounts, time deposits and demand accounts, as well as certificates of deposit. The Bank’s primary market area includes Carroll, Columbiana, Jefferson, Mahoning, Stark, Summit, Wayne, and contiguous counties in Ohio, Pennsylvania, and West Virginia. The Bank operates online and 21 branch locations.

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.

Consumers Bancorp, Inc. has a Value Score of 94, which is considered to be undervalued.

When you look at Consumers Bancorp, Inc.’s price-to-sales ratio at 1.15 compared to the industry median at 2.08, this company has a lower price relative to revenue compared to its peers. This could make Consumers Bancorp, Inc.’s stock more attractive for value investors.

Consumers Bancorp, Inc.’s price-earnings ratio is 5.41 compared to the industry median at 10.25. This means it has a lower share price relative to earnings compared to its peers. This could make Consumers Bancorp, Inc. more attractive for value investors.

Now, let’s assess Consumers Bancorp, Inc.’s EV/EBITDA ratio, also known as enterprise multiple. At 3.7, when compared to the industry median of 5.9, 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. Consumers Bancorp, Inc.’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. Consumers Bancorp, Inc.’s price-to-book ratio is higher than its industry median ratio of 1.03. This could make Consumers Bancorp, Inc. less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Consumers Bancorp, Inc.’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Consumers Bancorp, Inc.’s price-to-free-cash-flow ratio is lower than its industry median ratio of 10.41. This could make Consumers Bancorp, Inc. more attractive because the lower P/FCF ratio indicates that Consumers Bancorp, 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.

Eastern Bankshares Inc’s Value Grade

Value Grade:

Eastern Bankshares, Inc. is the stock holding company for for Eastern Bank (The Bank). The Bank provides a full range of banking and wealth management solutions for consumers and businesses of all sizes. The Company’s primary reportable segment is its banking business, which offers a range of commercial, retail, wealth management and banking services and consists primarily of attracting deposits from the general public and investing those deposits, together with borrowings and funds generated from operations, to originate loans in a variety of sectors and to invest in securities. It offers a variety of deposit, treasury management, electronic banking, interest rate protection and foreign exchange products to its customers. In addition, the Company offers cash management services to its corporate and municipal clients. The Bank operates in more than 120 locations serving communities in eastern Massachusetts, southern and coastal New Hampshire, and Rhode Island.

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.

Eastern Bankshares Inc has a Value Score of 70, which is considered to be undervalued.

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

You can read more about Eastern Bankshares 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.

Lloyds Banking Group PLC (ADR)’s Value Grade

Value Grade:

Lloyds Banking Group plc is a United Kingdom-based financial services provider. The Company provides a range of banking and financial services that is focused primarily on retail and commercial customers. It operates through three segments: Retail, Commercial Banking, and Insurance, Pensions and Investments. The Retail segment offers a range of financial services products to personal customers, including current accounts, savings, mortgages, credit cards, unsecured loans, motor finance and leasing solutions. The Commercial Banking segment serves small and medium businesses, as well as corporate and institutional clients, providing lending, transactional banking, working capital management, debt financing and risk management services. The Insurance, Pensions and Investments segment offers insurance, investment and wealth management products and services. The Company?s products and services are offered through brands, including Lloyds Bank, Halifax, Bank of Scotland and Scottish Widows.

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.

Lloyds Banking Group PLC (ADR) has a Value Score of 99, which is considered to be undervalued.

Lloyds Banking Group PLC (ADR)’s price-earnings ratio is 7.4 compared to the industry median at 10.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Lloyds Banking Group PLC (ADR) more attractive for value investors.

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

You can read more about Lloyds Banking Group PLC (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.

Peoples Financial Services Corp’s Value Grade

Value Grade:

Peoples Financial Services Corp. is a bank holding company, which provides a full range of financial services through its subsidiary, Peoples Security Bank and Trust Company, collectively Peoples Bank. Peoples Bank is a state-chartered bank and trust company. It provides a variety of commercial and retail banking services to business, non-profits, governmental, municipal agencies and professional customers, as well as retail customers, on a personalized basis. Its primary lending products are real estate, commercial and consumer loans. The Peoples Bank also offers automated teller machine access, credit cards, active investment accounts, trust department services and other various lending, depository and related financial services. Its primary deposit products are savings and demand deposit accounts and certificates of deposit. Its retail lending products include the various types of loans, including residential real estate; automobiles; manufactured housing; personal and home equity.

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.

Peoples Financial Services Corp has a Value Score of 68, which is considered to be undervalued.

Peoples Financial Services Corp’s price-earnings ratio is 12.3 compared to the industry median at 10.2. This means that it has a higher price relative to its earnings compared to its peers. This makes Peoples Financial Services Corp less attractive for value investors.

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

You can read more about Peoples 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.

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 4 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.

• Consumers Bancorp, Inc. stock has a Value Grade of A.
• Eastern Bankshares Inc stock has a Value Grade of B.
• Lloyds Banking Group PLC (ADR) stock has a Value Grade of A.
• Peoples Financial Services Corp stock has a Value Grade of B.

Now that you have a bit more background about each of the 4 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.

• 4 Undervalued Banks Stocks for Wednesday, January 31
• 7 Undervalued Banks Stocks for Tuesday, January 30
• What You Need to Know About California BanCorp's Q4 Earnings
• What You Need to Know About Cambridge Bancorp's Q4 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.