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.

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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, February 13, 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.

Farmers And Merchants Bank of Long Beach’s Value Grade

Value Grade:

Farmers & Merchants Bank of Long Beach (the Bank) is a California state- chartered bank that offers a broad range of banking products and services to individuals, professionals and small to medium-sized businesses. It operates 26 branches in California’s Los Angeles County, Orange County and Santa Barbara County, as well as through online and mobile banking platforms. The Bank as commercial bank, offers a range of banking products and services, including accepting demand, money market, savings, and time deposits; originating loans, including commercial real estate loans, construction loans, and commercial business loans; and providing other business-oriented banking products and services. It provides financing for residential loans, including single-family and multifamily loans. The Bank's loan portfolio consists of commercial and industrial, construction, commercial real estate, residential mortgage, equity lines, installment, and other loans. It also provides treasury 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.

Farmers And Merchants Bank of Long Beach has a Value Score of 90, which is considered to be undervalued.

When you look at Farmers And Merchants Bank of Long Beach’s price-to-sales ratio at 1.48 compared to the industry median at 1.95, this company has a lower price relative to revenue compared to its peers. This could make Farmers And Merchants Bank of Long Beach’s stock more attractive for value investors.

Farmers And Merchants Bank of Long Beach’s price-earnings ratio is 9.03 compared to the industry median at 9.86. This means it has a lower share price relative to earnings compared to its peers. This could make Farmers And Merchants Bank of Long Beach 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. Farmers And Merchants Bank of Long Beach’s shareholder yield is lower than its industry median ratio of 3.53%. 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. Farmers And Merchants Bank of Long Beach’s price-to-book ratio is lower than its industry median ratio of 0.99. This could make Farmers And Merchants Bank of Long Beach more attractive to investors looking for a new addition to their portfolio.

Hancock Whitney Corp’s Value Grade

Value Grade:

Hancock Whitney Corporation is a financial services company. It provides financial services through its bank subsidiary, Hancock Whitney Bank (the Bank), a Mississippi state bank. The Bank offers a range of traditional and online banking services to commercial, small business and retail customers, providing a range of transaction and savings deposit products, treasury management services, secured and unsecured loan products (including revolving credit facilities), letters of credit and similar financial guarantees. It provides trust and investment management services to retirement plans, corporations and individuals and provides its customers access to investment advisory and brokerage products. Its primary lending focus is to provide commercial, consumer and real estate loans to consumers, small and middle market businesses, and corporate clients in the markets and sectors served by the Bank. The Bank, through its trust department, offers a full range of trust services on a fee basis.

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.

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

Hancock Whitney Corp’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 Hancock Whitney Corp more attractive for value investors.

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

You can read more about Hancock Whitney 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.

ING Groep NV (ADR)’s Value Grade

Value Grade:

ING Groep N.V. (ING) is a financial institution. The Company offers banking services. The Company's segments include Retail Netherlands, which offers current and savings accounts, business lending, mortgages and other consumer lending in the Netherlands; Retail Belgium, which offers products that are similar to those in the Netherlands; Retail Germany, which offers current and savings accounts, mortgages and other customer lending; Retail Other, which offers products that are similar to those in the Netherlands, and Wholesale Banking, which offers wholesale banking activities (a full range of products from cash management to corporate finance), real estate and lease. The Company's Retail Banking business lines provide products and services to individuals, small and medium-sized enterprises (SMEs) and mid-corporates. ING's banking activities in Australia are undertaken by ING Bank (Australia) Limited (trading as ING Direct) and ING Bank NV Sydney Branch.

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.

ING Groep NV (ADR) has a Value Score of 89, which is considered to be undervalued.

ING Groep NV (ADR)’s price-earnings ratio is 5.9 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 ING Groep NV (ADR) more attractive for value investors.

ING Groep NV (ADR)’s price-to-book ratio is higher than its peers. This could make ING Groep NV (ADR) less attractive for value investors when compared to the industry median at 0.99.

You can read more about ING Groep NV (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.

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.

• Farmers And Merchants Bank of Long Beach stock has a Value Grade of A.
• Hancock Whitney Corp stock has a Value Grade of A.
• ING Groep NV (ADR) stock has a Value Grade of A.

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, February 13
• 7 Undervalued Banks Stocks for Monday, February 12
• What You Need to Know About Bank of N T Butterfield & Son Ltd's Q4 Earnings
• Why Banc of California Inc’s (BANC) Stock Is Up 4.31%

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.