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, March 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.

Brookline Bancorp, Inc.’s Value Grade

Value Grade:

Brookline Bancorp, Inc. is a holding company for Brookline Bank, Bank Rhode Island (BankRI), PCSB Bank, Brookline Securities Corp. and Clarendon Private, LLC. The Company's activities include acceptance of commercial, municipal and retail deposits, origination of mortgage loans on commercial and residential real estate located principally in all New England states, origination of commercial loans and leases to small- and mid-sized businesses, investment in debt and equity securities, and the offering of cash management and wealth and investment advisory services. The Company also provides specialty equipment financing through its subsidiary Eastern Funding, which is based in New York City, New York and Plainview, New York. Brookline Bank operates 29 full-service banking offices and two lending offices in the greater Boston metropolitan area. BankRI operates 20 full-service banking offices in the greater Providence, Rhode Island 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.

Brookline Bancorp, Inc. has a Value Score of 67, which is considered to be undervalued.

When you look at Brookline Bancorp, Inc.’s price-to-sales ratio at 1.47 compared to the industry median at 1.92, this company has a lower price relative to revenue compared to its peers. This could make Brookline Bancorp, Inc.’s stock more attractive for value investors.

Brookline Bancorp, Inc.’s price-earnings ratio is 11.30 compared to the industry median at 9.87. This means it has a higher share price relative to earnings compared to its peers. This could make Brookline Bancorp, Inc. less attractive for value investors.

Now, let’s assess Brookline Bancorp, Inc.’s EV/EBITDA ratio, also known as enterprise multiple. At 5.7, when compared to the industry median of 6.3, 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. Brookline Bancorp, Inc.’s shareholder yield is lower 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. Brookline Bancorp, Inc.’s price-to-book ratio is lower than its industry median ratio of 0.94. This could make Brookline Bancorp, Inc. more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Brookline 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. Brookline Bancorp, Inc.’s price-to-free-cash-flow ratio is higher than its industry median ratio of 10.51. This could make Brookline Bancorp, Inc. less attractive because the higher P/FCF ratio indicates that Brookline 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.

Capitol Federal Financial, Inc.’s Value Grade

Value Grade:

Capitol Federal Financial, Inc. is a unitary savings and loan holding company. The Company provides a full range of retail banking services through its subsidiary, Capitol Federal Savings Bank (the Bank), a federal savings bank, which has 46 traditional and five in-store banking offices serving primarily the metropolitan areas of Topeka, Wichita, Lawrence, Manhattan, Emporia and Salina, Kansas and portions of the Kansas City metropolitan area. The Bank attracts deposits primarily from the general public and from businesses and invests those funds primarily in permanent loans secured by first mortgages on owner-occupied, one-to four-family residences and in commercial loans. It offers an array of retail and business deposit products and services. These products include checking, savings, money market, certificates of deposit, and retirement accounts. The Bank’s deposit services are provided through its network of traditional branches and retail in-store locations, its call center.

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.

Capitol Federal Financial, Inc. has a Value Score of 86, which is considered to be undervalued.

Capitol Federal Financial, Inc.’s price-to-book ratio is higher than its peers. This could make Capitol Federal Financial, Inc. less attractive for value investors when compared to the industry median at 0.94.

You can read more about Capitol Federal Financial, 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.

Heritage Commerce Corp.’s Value Grade

Value Grade:

Heritage Commerce Corp is a bank holding company for its wholly owned subsidiary Heritage Bank of Commerce (the Bank). It offers a range of range of commercial and personal banking services to residents and the business/professional community in Alameda, Contra Costa, Marin, San Benito, San Francisco, San Mateo, and Santa Clara counties of California. It operates through two segments: Banking segment and Factoring segment. Its loan portfolio includes commercial and industrial loans; commercial real estate loans; construction loans; and small business administration (SBA) loans. It also offers home equity lines of credit. It provides non-interest-bearing demand, interest bearing demand, and money market accounts. It offers certificates of deposit and savings accounts. It provides other products and services, such as bank by mail, night depositories, safe deposit boxes, automated payroll services, electronic funds transfers, online bill pay, and homeowner association 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.

Heritage Commerce Corp. has a Value Score of 88, which is considered to be undervalued.

Heritage Commerce 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 Heritage Commerce Corp. more attractive for value investors.

Heritage Commerce Corp.’s price-to-book ratio is higher than its peers. This could make Heritage Commerce Corp. less attractive for value investors when compared to the industry median at 0.94.

You can read more about Heritage Commerce 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.

Premier Financial Corp (OHIO)’s Value Grade

Value Grade:

Premier Financial Corp. is a bank holding company that conducts business through its wholly-owned subsidiaries, Premier Bank (the Bank). The Bank is primarily engaged in community banking. The Bank attracts deposits from the general public through its offices and website, and uses those and other available sources of funds to originate residential real estate loans, commercial real estate loans, commercial loans, home improvement and home equity loans and consumer loans. In addition, the Bank invests in United States Treasury and federal government agency obligations, obligations of states and political subdivisions, mortgage-backed securities that are issued by federal agencies, including real estate mortgage investment conduits (REMICs) and residential collateralized mortgage obligations (CMOs), and corporate bonds. The Bank conducts its operations through approximately 74 full-service banking center offices, 12 loan offices and two wealth 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.

Premier Financial Corp (OHIO) has a Value Score of 83, which is considered to be undervalued.

Premier Financial Corp (OHIO)’s price-earnings ratio is 6.4 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 Premier Financial Corp (OHIO) more attractive for value investors.

Premier Financial Corp (OHIO)’s price-to-book ratio is higher than its peers. This could make Premier Financial Corp (OHIO) less attractive for value investors when compared to the industry median at 0.94.

You can read more about Premier Financial Corp (OHIO)’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.

Potomac Bancshares Inc’s Value Grade

Value Grade:

Potomac Bancshares, Inc. is the one bank holding company of Bank of Charles Town (BCT), also known as The Community's Bank. BCT is a locally owned community bank with nine full-service offices and one loan production office serving the Eastern Panhandle of West Virginia, Washington County, Maryland and Loudoun County, Virginia. Its personal banking services include personal checking; savings, Certificates of Deposit (CD) and Individual Retirement Accounts (IRA); Centsables financial education; online and mobile banking; Convenience services; home equity lending; personal loans; consumer credit cards; account opening service, and others. The Company’s business banking services include specialties, commercial loans, small business administration (SBA) lending, business checking solutions, management, Autobooks, online and mobile banking, business credit cards and others. It offers fixed and adjustable-rate mortgages, construction loans, and VA, FHA, and USDA options.

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.

Potomac Bancshares Inc has a Value Score of 83, which is considered to be undervalued.

Potomac Bancshares Inc’s price-earnings ratio is 8.6 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 Potomac Bancshares Inc more attractive for value investors.

Potomac Bancshares Inc’s price-to-book ratio is lower than its peers. This could make Potomac Bancshares Inc more attractive for value investors when compared to the industry median at 0.94.

You can read more about Potomac 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.

Western Alliance Bancorporation’s Value Grade

Value Grade:

Western Alliance Bancorporation is a bank holding company. The Company provides a full spectrum of customized loan, deposit, and treasury management capabilities, including funds transfer and other digital payment offerings through its wholly owned banking subsidiary, Western Alliance Bank (WAB). WAB operates through five full-service banking divisions: Alliance Bank of Arizona, Bank of Nevada, Bridge Bank, First Independent Bank, and Torrey Pines Bank. The Company also provides a range of specialized financial services to business customers across the country, including mortgage banking services through AmeriHome and treasury management services to the homeowner's association sector, and digital payment services for the class action legal industry. It has two non-bank subsidiaries, such as CS Insurance Company (CSI) and Western Alliance Trust Company, N.A. (WATC). CSI is a captive insurance company. WATC provides corporate trust services and levered loan administration solutions.

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.

Western Alliance Bancorporation has a Value Score of 84, which is considered to be undervalued.

Western Alliance Bancorporation’s price-earnings ratio is 8.4 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 Western Alliance Bancorporation more attractive for value investors.

Western Alliance Bancorporation’s price-to-book ratio is lower than its peers. This could make Western Alliance Bancorporation more attractive for value investors when compared to the industry median at 0.94.

You can read more about Western Alliance Bancorporation’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.

• Brookline Bancorp, Inc. stock has a Value Grade of B.
• Capitol Federal Financial, Inc. stock has a Value Grade of A.
• Heritage Commerce Corp. stock has a Value Grade of A.
• Premier Financial Corp (OHIO) stock has a Value Grade of A.
• Potomac Bancshares Inc stock has a Value Grade of A.
• Western Alliance Bancorporation 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, March 05
• 4 Undervalued Banks Stocks for Monday, March 04
• Why 1st Source Corp’s (SRCE) Stock Is Up 5.41%
• Why Bancorp Inc’s (TBBK) Stock Is Down 4.58%

AAII Disclaimer

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