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, February 05, 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.

Barclays PLC (ADR)’s Value Grade

Value Grade:

Barclays PLC is a United Kingdom-based universal bank. The Company supports individuals and small businesses through its consumer banking services, and larger businesses and institutions through its corporate and investment banking services. Its operations include consumer banking and payment services around the United Kingdom, United States and Europe, as well as a global corporate and investment bank. Its divisions include Barclays UK and Barclays International. Barclays UK division includes UK Personal Banking, UK Business Banking and Barclaycard Consumer UK businesses, which are carried on by its UK ring-fenced bank Barclays Bank UK PLC and other entities within the Company. Barclays International division includes corporate and investment bank and consumer, cards and payments businesses, which are operated within its non-ring-fenced bank Barclays Bank PLC and other entities within the Company. Its divisions are supported by its subsidiary, Barclays Execution Services Limited.

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.

Barclays PLC (ADR) has a Value Score of 100, which is considered to be undervalued.

Barclays PLC (ADR)’s price-earnings ratio is 4.50 compared to the industry median at 9.87. This means it has a lower share price relative to earnings compared to its peers. This could make Barclays PLC (ADR) 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. Barclays PLC (ADR)’s shareholder yield is higher 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. Barclays PLC (ADR)’s price-to-book ratio is lower than its industry median ratio of 0.99. This could make Barclays PLC (ADR) more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Barclays PLC (ADR)’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Barclays PLC (ADR)’s price-to-free-cash-flow ratio is lower than its industry median ratio of 9.86. This could make Barclays PLC (ADR) more attractive because the lower P/FCF ratio indicates that Barclays PLC (ADR) 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.

Bank of East Asia Ltd (ADR)’s Value Grade

Value Grade:

Bank of East Asia Ltd is a company mainly engaged in the banking business. The Company operates its business through nine segments. The Mainland China Operations segment mainly include the back office unit for Mainland China operations in Hong Kong, all subsidiaries and associates operating in Mainland China, except those subsidiaries carrying out data processing and other back office operations for Hong Kong operations in Mainland China. The Corporate Banking segment provides corporate lending and loan syndication, asset-based lending, commercial lending, securities lending and trade financing activities with correspondent banks and corporates. The Personal Banking segment is engaged in the branch operations, personal internet banking, consumer finance, property loans and credit card business to individual customers. The Overseas Operations segment provides back office unit for overseas banking operations in Hong Kong, Macau Branch, Taiwan Branch and all branches, subsidiaries and ass

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.

Bank of East Asia Ltd (ADR) has a Value Score of 99, which is considered to be undervalued.

Bank of East Asia Ltd (ADR)’s price-earnings ratio is 4.9 compared to the industry median at 9.9. This means that it has a lower price relative to its earnings compared to its peers. This makes Bank of East Asia Ltd (ADR) more attractive for value investors.

Bank of East Asia Ltd (ADR)’s price-to-book ratio is higher than its peers. This could make Bank of East Asia Ltd (ADR) less attractive for value investors when compared to the industry median at 0.99.

You can read more about Bank of East Asia Ltd (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.

Bank7 Corp’s Value Grade

Value Grade:

Bank7 Corp. is a bank holding company. Through its wholly owned subsidiary, Bank7 (the Bank), it operates about 12 full-service branches in Oklahoma, Texas, and Kansas. The Bank is a full-service commercial bank. The Bank is primarily engaged in providing a range of banking and financial services to individual and corporate customers located in Oklahoma, Texas, and Kansas. The Bank has a particular focus on loan categories, such as commercial real estate lending, hospitality lending, energy lending, and commercial and industrial lending. It also provides consumer lending services to individuals for personal and household purposes, including secured and unsecured term loans and home improvement loans. Consumer lending services include residential real estate loans and mortgage banking services, personal lines of credit, and other installment loans. The Bank offers deposit banking products, including commercial deposit services, commercial checking, and other 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.

Bank7 Corp has a Value Score of 83, which is considered to be undervalued.

Bank7 Corp’s price-earnings ratio is 9.0 compared to the industry median at 9.9. This means that it has a lower price relative to its earnings compared to its peers. This makes Bank7 Corp more attractive for value investors.

Bank7 Corp’s price-to-book ratio is lower than its peers. This could make Bank7 Corp more attractive for value investors when compared to the industry median at 0.99.

You can read more about Bank7 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.

Central Valley Community Bancorp’s Value Grade

Value Grade:

Central Valley Community Bancorp is a bank holding company for Central Valley Community Bank (the Bank). The Bank conducts a commercial banking business, which includes accepting demand, savings and time deposits and making commercial, real estate and consumer loans. It also provides domestic and international wire transfer services and provides safe deposit boxes and other customary banking services. The Bank also offers Internet banking that consists of inquiry, account status, bill paying, account transfers, and cash management. The Bank has a Real Estate Division, an Agribusiness Center, and an SBA Lending Division. The Bank?s Real Estate Division processes or assists in processing the majority of the Bank's real estate-related transactions, including interim construction loans for single family residences and commercial buildings. The Bank offers permanent single family residential loans through its mortgage broker services. The Bank operates over 19 full-service banking offices.

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.

Central Valley Community Bancorp has a Value Score of 82, which is considered to be undervalued.

Central Valley Community Bancorp’s price-earnings ratio is 7.9 compared to the industry median at 9.9. This means that it has a lower price relative to its earnings compared to its peers. This makes Central Valley Community Bancorp more attractive for value investors.

Central Valley Community Bancorp’s price-to-book ratio is lower than its peers. This could make Central Valley Community Bancorp more attractive for value investors when compared to the industry median at 0.99.

You can read more about Central Valley Community Bancorp’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.

WSFS Financial Corporation’s Value Grade

Value Grade:

WSFS Financial Corporation is a savings and loan holding company. The Company operates through its subsidiary, Wilmington Savings Fund Society, FSB (the Bank). The Company?s segments include WSFS Bank, Cash Connect and Wealth Management. The WSFS Bank segment provides loans and leases and other financial products to commercial and retail customers. WSFS Bank also offers a broad variety of consumer loan products, retail securities and insurance brokerage services through its retail branches, and mortgage and title services through WSFS Mortgage. Cash Connect provides ATM vault cash, smart safe and other cash logistics services in the United States through partnerships with various networks, manufacturers and service providers in the cash logistics industry. The Wealth Management segment provides an array of planning and advisor services, investment management, personal and institutional trust services, and credit and deposit products to individuals, corporate, and institutional 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.

WSFS Financial Corporation has a Value Score of 74, which is considered to be undervalued.

WSFS Financial Corporation’s price-earnings ratio is 9.8 compared to the industry median at 9.9. This means that it has a lower price relative to its earnings compared to its peers. This makes WSFS Financial Corporation more attractive for value investors.

WSFS Financial Corporation’s price-to-book ratio is lower than its peers. This could make WSFS Financial Corporation more attractive for value investors when compared to the industry median at 0.99.

You can read more about WSFS Financial Corporation’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.

• Barclays PLC (ADR) stock has a Value Grade of A.
• Bank of East Asia Ltd (ADR) stock has a Value Grade of A.
• Bank7 Corp stock has a Value Grade of A.
• Central Valley Community Bancorp stock has a Value Grade of A.
• WSFS Financial Corporation stock has a Value Grade of B.

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, February 05
• 3 Undervalued Banks Stocks for Friday, February 02
• Why ACNB Corp’s (ACNB) Stock Is Down 7.37%
• Why BCB Bancorp Inc’s (BCBP) Stock Is Down 4.92%

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.