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 Monday, March 11, 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.

C&F; Financial Corp’s Value Grade

Value Grade:

C&F; Financial Corporation is a bank holding company. The Company owns Citizens and Farmers Bank (C&F; Bank), which is an independent commercial bank. The Company's segments include community banking, mortgage banking and consumer finance. Community banking segment provides services through C&F; Bank. C&F; Bank provides a range of banking services to individuals and businesses. These services include various types of checking and savings deposit accounts, as well as business, real estate, development, home equity and installment loans. C&F; Bank operates approximately 31 banking offices and four commercial loan offices. Mortgage banking segment, through C&F; Mortgage Corporation, offers a range of residential mortgage loans, which are originated for sale to investors in the secondary mortgage market. Consumer finance segment provides services through C&F; Finance Company (C&F; Finance). C&F; Finance is a regional finance company purchasing automobile, marine and recreational vehicle loans.

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.

C&F; Financial Corp has a Value Score of 93, which is considered to be undervalued.

When you look at C&F; Financial Corp’s price-to-sales ratio at 1.41 compared to the industry median at 1.95, this company has a lower price relative to revenue compared to its peers. This could make C&F; Financial Corp’s stock more attractive for value investors.

C&F; Financial Corp’s price-earnings ratio is 7.52 compared to the industry median at 9.82. This means it has a lower share price relative to earnings compared to its peers. This could make C&F; Financial Corp more attractive for value investors.

Now, let’s assess C&F; Financial Corp’s EV/EBITDA ratio, also known as enterprise multiple. At 6.8, when compared to the industry median of 6.4, the company may be considered overvalued 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. C&F; Financial Corp’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. C&F; Financial Corp’s price-to-book ratio is lower than its industry median ratio of 0.95. This could make C&F; Financial Corp more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at C&F; Financial Corp’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. C&F; Financial Corp’s price-to-free-cash-flow ratio is lower than its industry median ratio of 10.83. This could make C&F; Financial Corp more attractive because the lower P/FCF ratio indicates that C&F; Financial Corp 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.

Sumitomo Mitsui Financial Group Inc(ADR)’s Value Grade

Value Grade:

Sumitomo Mitsui Financial Group Inc, formerly Sumitomo Mitsui Financial Group Co Ltd, is a Japan-based company engaged in the commercial banking, leasing, securities and consumer finance business. The Company has five business segments. The Wholesale segment is engaged in the banking, leasing and securities business, as well as the venture capital business and management consulting services business for domestic large companies. The Retail segment is engaged in the banking, securities, credit cards and consumer finance business, as well as pension management business for domestic individuals and small corporate customers. The Global segment is engaged in the banking, leasing and securities business, as well as swap-related business for overseas Japanese and non-Japanese companies. The Market segment is engaged in the banking, securities and other financial markets related businesses. The Head Office Management segment is engaged in the system development and other businesses.

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.

Sumitomo Mitsui Financial Group Inc(ADR) has a Value Score of 78, which is considered to be undervalued.

Sumitomo Mitsui Financial Group Inc(ADR)’s price-earnings ratio is 14.6 compared to the industry median at 9.8. This means that it has a higher price relative to its earnings compared to its peers. This makes Sumitomo Mitsui Financial Group Inc(ADR) less attractive for value investors.

Sumitomo Mitsui Financial Group Inc(ADR)’s price-to-book ratio is higher than its peers. This could make Sumitomo Mitsui Financial Group Inc(ADR) less attractive for value investors when compared to the industry median at 0.95.

You can read more about Sumitomo Mitsui Financial Group Inc(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.

S&T; Bancorp Inc’s Value Grade

Value Grade:

S&T; Bancorp, Inc. is a bank holding company. The Company’s segments include Commercial Real Estate (CRE), Commercial and Industrial (C&I;), Commercial Construction, Business Banking, Consumer Real Estate and Other Consumer. The CRE segment includes loans secured by commercial purpose real estate, including both owner-occupied properties and investment properties for various purposes such as hotels, retail, multifamily and healthcare. The C&I; segment includes loans made to operating companies or manufacturers for the purpose of production, operating capacity, accounts receivable, inventory, or equipment financing. The Commercial Construction segment includes loans made to finance the construction of buildings or other structures, as well as to finance the acquisition and development of raw land for various purposes. The Business Banking segment includes commercial loans made to small businesses. Consumer Real Estate segment includes loans secured by first and second liens.

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.

S&T; Bancorp Inc has a Value Score of 81, which is considered to be undervalued.

S&T; Bancorp Inc’s price-earnings ratio is 8.5 compared to the industry median at 9.8. This means that it has a lower price relative to its earnings compared to its peers. This makes S&T; Bancorp Inc more attractive for value investors.

S&T; Bancorp Inc’s price-to-book ratio is lower than its peers. This could make S&T; Bancorp Inc fairly attractive for value investors when compared to the industry median at 0.95.

You can read more about S&T; 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.

Third Coast Bancshares Inc’s Value Grade

Value Grade:

Third Coast Bancshares, Inc. is a bank holding company. The Company operates primarily in the Greater Houston, Dallas-Fort Worth, and Austin-San Antonio markets through its wholly owned subsidiary, Third Coast Bank, SSB. It focuses on providing commercial banking solutions to small and medium-sized businesses and professionals with operations in its markets. Its deposits include checking accounts, money market accounts, savings accounts, a variety of certificates of deposit and individual retirement accounts. It provides a range of banking services, such as retail and commercial online banking platforms, mobile banking apps, debit cards, credit cards, a suite of treasury management solutions, merchant card services and customer digital solutions. Its investment portfolio includes state and municipal securities, mortgage-backed securities, agency collateralized mortgage obligations, United States treasury bonds, and corporate bonds. It conducts banking operations through 16 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.

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

Third Coast Bancshares Inc’s price-earnings ratio is 11.3 compared to the industry median at 9.8. This means that it has a higher price relative to its earnings compared to its peers. This makes Third Coast Bancshares Inc less attractive for value investors.

Third Coast Bancshares Inc’s price-to-book ratio is higher than its peers. This could make Third Coast Bancshares Inc less attractive for value investors when compared to the industry median at 0.95.

You can read more about Third Coast 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.

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.

• C&F; Financial Corp stock has a Value Grade of A.
• Sumitomo Mitsui Financial Group Inc(ADR) stock has a Value Grade of B.
• S&T; Bancorp Inc stock has a Value Grade of A.
• Third Coast Bancshares Inc 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 Monday, March 11
• 4 Undervalued Banks Stocks for Friday, March 08
• Why Citizens Financial Services Inc’s (CZFS) Stock Is Down 4.94%
• Why LINKBANCORP Inc’s (LNKB) Stock Is Up 6.57%

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.