Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 6 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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6 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 6 undervalued stocks in the Banks industry for Tuesday, February 06, 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.

Evans Bancorp Inc’s Value Grade

Value Grade:

Evans Bancorp, Inc. is a financial holding company. The Company conducts its business through its two direct, wholly owned subsidiaries: Evans Bank, National Association (the Bank), and the Bank’s subsidiaries, Evans National Leasing, Inc. (ENL), and Evans National Holding Corp. (ENHC); and Evans National Financial Services, LLC (ENFS). Its segments include banking activities and insurance agency activities. The banking activities segment includes both commercial and consumer banking services, including a range of lending and depository services, as well as offering non-deposit investment products, such as annuities and mutual funds. The insurance agency activities segment includes the activities of selling various premium-based insurance policies on a commission basis, including business and personal insurance, employee benefits, surety bonds, and risk 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.

Evans Bancorp Inc has a Value Score of 89, which is considered to be undervalued.

When you look at Evans Bancorp Inc’s price-to-sales ratio at 1.66 compared to the industry median at 1.94, this company has a lower price relative to revenue compared to its peers. This could make Evans Bancorp Inc’s stock more attractive for value investors.

Evans Bancorp Inc’s price-earnings ratio is 6.55 compared to the industry median at 9.74. This means it has a lower share price relative to earnings compared to its peers. This could make Evans Bancorp Inc more attractive for value investors.

Now, let’s assess Evans Bancorp Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 3.8, when compared to the industry median of 6.2, 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. Evans Bancorp Inc’s shareholder yield is higher than its industry median ratio of 3.54%. 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. Evans Bancorp Inc’s price-to-book ratio is higher than its industry median ratio of 0.99. This could make Evans Bancorp Inc less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Evans 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. Evans Bancorp Inc’s price-to-free-cash-flow ratio is higher than its industry median ratio of 9.70. This could make Evans Bancorp Inc less attractive because the higher P/FCF ratio indicates that Evans 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.

Provident Financial Holdings, Inc.’s Value Grade

Value Grade:

Provident Financial Holdings, Inc. is a holding company of Provident Savings Bank, F.S.B. (the Bank). The Bank is a federally chartered stock savings bank. The Bank is a financial services company serving consumers and small to mid-sized businesses in the Inland Empire region of Southern California. The Bank conducts its business operations as Provident Bank, and through its subsidiary, Provident Financial Corp (PFC). The business activities of the Bank consist of community banking, investment services and trustee services for real estate transactions. The Bank’s community banking operations primarily consist of accepting deposits from customers within the communities surrounding its full-service offices and investing those funds in single-family, multi-family, commercial real estate, construction and other mortgage loans. The Bank conducts trustee services for its real estate transactions through PFC. It operates approximately 12 full-service banking offices in Riverside County.

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.

Provident Financial Holdings, Inc. has a Value Score of 88, which is considered to be undervalued.

Provident Financial Holdings, Inc.’s price-earnings ratio is 13.3 compared to the industry median at 9.7. This means that it has a higher price relative to its earnings compared to its peers. This makes Provident Financial Holdings, Inc. less attractive for value investors.

Provident Financial Holdings, Inc.’s price-to-book ratio is higher than its peers. This could make Provident Financial Holdings, Inc. less attractive for value investors when compared to the industry median at 0.99.

You can read more about Provident Financial Holdings, 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.

Sandy Spring Bancorp Inc’s Value Grade

Value Grade:

Sandy Spring Bancorp, Inc. is the bank holding company for Sandy Spring Bank (the Bank). The Company operates through two segments: Community Banking and Investment Management. The Company's Community Banking segment operates through Sandy Spring Bank and involves delivering a range of financial products and services, including various loan and deposit products, to both individuals and businesses. The Investment Management segment operates through West Financial Services, Inc. and Rembert Pendleton Jackson (RPJ), a subsidiary of the Bank, which provides investment management and financial planning services to individuals, families, small businesses and associations, including cash flow analysis, investment review, tax planning, retirement planning, insurance analysis and estate planning. The Bank offers a range of commercial and retail banking, mortgage, private banking and trust services at over 50 locations throughout central Maryland, northern Virginia, and Washington D.C.

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.

Sandy Spring Bancorp Inc has a Value Score of 85, which is considered to be undervalued.

Sandy Spring Bancorp Inc’s price-earnings ratio is 8.6 compared to the industry median at 9.7. This means that it has a lower price relative to its earnings compared to its peers. This makes Sandy Spring Bancorp Inc more attractive for value investors.

Sandy Spring Bancorp Inc’s price-to-book ratio is higher than its peers. This could make Sandy Spring Bancorp Inc less attractive for value investors when compared to the industry median at 0.99.

You can read more about Sandy Spring 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.

Southside Bancshares Inc’s Value Grade

Value Grade:

Southside Bancshares, Inc. is a bank holding company for Southside Bank. The Company is a community-focused financial institution that offers a range of financial services to individuals, businesses, municipal entities and nonprofit organizations in the communities that it serves. These services include consumer and commercial loans, deposit accounts, wealth management, trust and brokerage services. Its consumer loan services include one-to-four family residential loans, home equity loans, home improvement loans, automobile loans and other consumer related loans. It offers a variety of deposit accounts with a range of interest rates and terms, including savings, money market, interest and non-interest-bearing checking accounts and certificate of deposits (CDs). Its trust and wealth management services include investment management, administration of irrevocable, revocable and testamentary trusts, custodian services and others. It operates through approximately 55 branches.

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.

Southside Bancshares Inc has a Value Score of 78, which is considered to be undervalued.

Southside Bancshares Inc’s price-earnings ratio is 10.6 compared to the industry median at 9.7. This means that it has a higher price relative to its earnings compared to its peers. This makes Southside Bancshares Inc less attractive for value investors.

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

You can read more about Southside 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.

USCB Financial Holdings Inc’s Value Grade

Value Grade:

USCB Financial Holdings, Inc. is a bank holding company for U.S. Century Bank (the Bank). The Bank is a state-chartered, non-member financial institution, which provides financial services through its banking centers located in South Florida. The Bank operates approximately ten banking centers in South Florida providing a wide range of personal and business banking products and services. Its specialty banking offerings include small business administration (SBA) lending, yacht lending, homeowner association (HOA) services and global banking services. The Bank offers traditional deposit products, including commercial and consumer checking accounts, money market deposit accounts, savings accounts and certificates of deposit with a variety of terms and rates as well as a suite of treasury, commercial payments and cash management services. Additionally, it offers deposit products for municipalities and other public entities.

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.

USCB Financial Holdings Inc has a Value Score of 64, which is considered to be undervalued.

USCB Financial Holdings Inc’s price-earnings ratio is 14.5 compared to the industry median at 9.7. This means that it has a higher price relative to its earnings compared to its peers. This makes USCB Financial Holdings Inc less attractive for value investors.

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

You can read more about USCB Financial Holdings 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.

Valley National Bancorp’s Value Grade

Value Grade:

Valley National Bancorp is a bank holding company and financial holding company. The Company?s principal subsidiary includes Valley National Bank (the Bank). It offers a full suite of national and regional banking solutions through various commercial, retail, insurance and wealth management financial services products. It provides personalized service and customized solutions to assist its customers with their financial service needs. Its solutions include, but are not limited to, traditional consumer and commercial deposit and lending products, commercial real estate financing, small business loans, equipment financings, insurance and wealth management financial services products, cash management solutions, and personal financing solutions, such as residential mortgages, home equity loans and automobile financing. It also offers niche financial services, including loan and deposit products for homeowners? associations, insurance premium financing and cannabis-related 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.

Valley National Bancorp has a Value Score of 91, which is considered to be undervalued.

Valley National Bancorp’s price-earnings ratio is 9.4 compared to the industry median at 9.7. This means that it has a lower price relative to its earnings compared to its peers. This makes Valley National Bancorp more attractive for value investors.

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

You can read more about Valley National 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.

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 6 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.

• Evans Bancorp Inc stock has a Value Grade of A.
• Provident Financial Holdings, Inc. stock has a Value Grade of A.
• Sandy Spring Bancorp Inc stock has a Value Grade of A.
• Southside Bancshares Inc stock has a Value Grade of B.
• USCB Financial Holdings Inc stock has a Value Grade of B.
• Valley National Bancorp stock has a Value Grade of A.

Now that you have a bit more background about each of the 6 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.

• 6 Undervalued Banks Stocks for Tuesday, February 06
• 5 Undervalued Banks Stocks for Monday, February 05
• What You Need to Know About Banco Santander-Chile (ADR)'s Q4 Earnings
• Why Banco Bbva Argentina SA (ADR)’s (BBAR) Stock Is Down 6.39%

AAII Disclaimer

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