Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 7 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.

Click the button below to learn more about A+ Investor and subscribe today.

7 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 7 undervalued stocks in the Banks industry for Friday, March 15, 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.

Popular Inc’s Value Grade

Value Grade:

Popular, Inc. (Popular) is a financial holding company. The Company operates in two segments: Banco Popular de Puerto Rico (BPPR), which includes its Puerto Rico business, and Banco Popular North America (BPNA), which includes its the United States mainland business. The Company has operations in Puerto Rico, the United States and the Caribbean. The Company's BPPR segment provides retail, mortgage and commercial banking services through its banking subsidiary, Banco Popular de Puerto Rico, as well as auto and equipment leasing and financing, investment banking, broker-dealer and insurance services through specialized subsidiaries. The Company's BPNA segment consists of Popular North America, Inc. (PNA) functioning as the holding company for its operations in the United States. It also operates PNA's subsidiary, E-LOAN, Inc. The banking operations of BPNA in the United States mainland are based in New York, Florida and New Jersey, conducted under the name of Popular Community Bank.

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.

Popular Inc has a Value Score of 68, which is considered to be undervalued.

When you look at Popular Inc’s price-to-sales ratio at 1.81 compared to the industry median at 1.87, this company has a lower price relative to revenue compared to its peers. This could make Popular Inc’s stock more attractive for value investors.

Popular Inc’s price-earnings ratio is 10.90 compared to the industry median at 9.55. This means it has a higher share price relative to earnings compared to its peers. This could make Popular Inc less attractive for value investors.

Now, let’s assess Popular Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 7.4, when compared to the industry median of 6.6, 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. Popular Inc’s shareholder yield is lower than its industry median ratio of 3.62%. 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. Popular Inc’s price-to-book ratio is higher than its industry median ratio of 0.93. This could make Popular Inc less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Popular Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Popular Inc’s price-to-free-cash-flow ratio is higher than its industry median ratio of 10.62. This could make Popular Inc less attractive because the higher P/FCF ratio indicates that Popular 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.

Bridgewater Bancshares Inc’s Value Grade

Value Grade:

Bridgewater Bancshares, Inc. is a financial holding company with one wholly owned subsidiary: Bridgewater Bank (the Bank). The Bank focuses primarily on commercial lending, consisting of loans secured by nonfarm, nonresidential properties, loans secured by multifamily residential properties, nonowner occupied single family residential properties, construction loans, land development loans and commercial and industrial loans. It offers loan and deposit products primarily for commercial clients. The Bank has developed a suite of deposit products targeted at commercial clients, including a variety of remote deposit and cash management products, along with commercial transaction accounts. The Bank also offers consumers traditional retail deposit products through its branch network, along with online, mobile, and direct banking channels. The Bank has seven full-service offices located in Bloomington, Greenwood, Minneapolis (two), St. Louis Park, Orono, and St. Paul, Minnesota.

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.

Bridgewater Bancshares Inc has a Value Score of 76, which is considered to be undervalued.

Bridgewater Bancshares Inc’s price-earnings ratio is 8.9 compared to the industry median at 9.6. This means that it has a lower price relative to its earnings compared to its peers. This makes Bridgewater Bancshares Inc more attractive for value investors.

Bridgewater Bancshares Inc’s price-to-book ratio is lower than its peers. This could make Bridgewater Bancshares Inc fairly attractive for value investors when compared to the industry median at 0.93.

You can read more about Bridgewater 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.

Bankwell Financial Group Inc’s Value Grade

Value Grade:

Bankwell Financial Group, Inc. is a bank holding company. The Company offers a range of financial services through its banking subsidiary, Bankwell Bank (the Bank). The Bank is a Connecticut state non-member bank. The Bank's commercial lending products include owner-occupied commercial real estate loans, commercial real estate investment loans, commercial loans (such as business term loans, equipment financing and lines of credit) to small and mid-sized businesses, and real estate construction and development loans. Its depository products include checking, savings, money market and certificates of deposit. The Bank operates branches in New Canaan, Stamford, Fairfield, Westport, Darien, Norwalk, and Hamden, Connecticut. The Bank provides a range of services to clients in its market, an area encompassing approximately a 100-mile radius around its branch network.

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.

Bankwell Financial Group Inc has a Value Score of 95, which is considered to be undervalued.

Bankwell Financial Group Inc’s price-earnings ratio is 5.4 compared to the industry median at 9.6. This means that it has a lower price relative to its earnings compared to its peers. This makes Bankwell Financial Group Inc more attractive for value investors.

Bankwell Financial Group Inc’s price-to-book ratio is higher than its peers. This could make Bankwell Financial Group Inc less attractive for value investors when compared to the industry median at 0.93.

You can read more about Bankwell Financial Group 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.

First Farmers and Merchants Corp’s Value Grade

Value Grade:

First Farmers and Merchants Corporation is the holding company for First Farmers and Merchants Bank (the Bank). The Bank is a community bank serving the Middle Tennessee area through about 22 offices in seven Middle Tennessee counties. The Bank is primarily engaged in providing a range of banking and financial services, including lending, investing of funds, obtaining deposits, trust and wealth management operations, and other financing activities to individual and corporate customers in the Middle Tennessee area. The Bank’s personal banking includes retire and invest, credit cards, personal lending, and online and mobile banking. The Bank’s business banking includes business retire and invest, business treasury management, business loans, business credit cards, and business online and mobile banking. The Bank’s wealth management and trust services include asset management, trust services, estate administration, and family office service.

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.

First Farmers and Merchants Corp has a Value Score of 87, which is considered to be undervalued.

First Farmers and Merchants Corp’s price-earnings ratio is 7.6 compared to the industry median at 9.6. This means that it has a lower price relative to its earnings compared to its peers. This makes First Farmers and Merchants Corp more attractive for value investors.

First Farmers and Merchants Corp’s price-to-book ratio is lower than its peers. This could make First Farmers and Merchants Corp more attractive for value investors when compared to the industry median at 0.93.

You can read more about First Farmers and Merchants 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 94, which is considered to be undervalued.

ING Groep NV (ADR)’s price-earnings ratio is 6.8 compared to the industry median at 9.6. 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 lower than its peers. This could make ING Groep NV (ADR) more attractive for value investors when compared to the industry median at 0.93.

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.

Banco Santander SA (ADR)’s Value Grade

Value Grade:

Banco Santander, S.A. is a Spain-based company engaged as a retail and commercial bank. The Banks segments include Continental Europe, the United Kingdom, Latin America and the United States. The Continental Europe segment covers all businesses in the Continental Europe. The United Kingdom segment includes the businesses developed by various units and branches in the country. The Latin America segment embraces all its financial activities conducted through its banks and subsidiaries in the region. The United States segment includes the Intermediate Holding Company (IHC) and its subsidiaries Santander Bank, Banco Santander Puerto Rico, Santander Consumer USA, Banco Santander International, Santander Investment Securities, and the Santander branch in New York. The Company's commercial model satisfies the needs of all types of customers: individuals with various income levels.

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.

Banco Santander SA (ADR) has a Value Score of 98, which is considered to be undervalued.

Banco Santander SA (ADR)’s price-earnings ratio is 5.8 compared to the industry median at 9.6. This means that it has a lower price relative to its earnings compared to its peers. This makes Banco Santander SA (ADR) more attractive for value investors.

Banco Santander SA (ADR)’s price-to-book ratio is higher than its peers. This could make Banco Santander SA (ADR) less attractive for value investors when compared to the industry median at 0.93.

You can read more about Banco Santander SA (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.

TrustCo Bank Corp NY’s Value Grade

Value Grade:

TrustCo Bank Corp NY is a savings and loan holding company. The Company?s principal subsidiary is Trustco Bank (the Bank). The Bank is a federal savings bank engaged in providing general banking services to individuals and businesses. The Bank operates over 158 automatic teller machines and approximately 143 banking offices in Albany, Columbia, Dutchess, Greene, Montgomery, Orange, Putnam, Rensselaer, Rockland, Saratoga, Schenectady, Schoharie, Ulster, Warren, Washington, and Westchester counties of New York, Brevard, Charlotte, Flagler, Hillsborough, Indian River, Lake, Manatee, Martin, Orange, Osceola, Palm Beach, Polk, Sarasota, Seminole, and Volusia counties in Florida, Bennington County in Vermont, Berkshire County in Massachusetts and Bergen County in New Jersey. Its business also consists of accepting deposits and making loans and investments. The Bank also lends in Essex and Fulton counties, Passaic counties, and Sumter counties, where it has no branch locations.

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.

TrustCo Bank Corp NY has a Value Score of 76, which is considered to be undervalued.

TrustCo Bank Corp NY’s price-earnings ratio is 8.6 compared to the industry median at 9.6. This means that it has a lower price relative to its earnings compared to its peers. This makes TrustCo Bank Corp NY more attractive for value investors.

TrustCo Bank Corp NY’s price-to-book ratio is higher than its peers. This could make TrustCo Bank Corp NY less attractive for value investors when compared to the industry median at 0.93.

You can read more about TrustCo Bank Corp NY’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 7 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.

• Popular Inc stock has a Value Grade of B.
• Bridgewater Bancshares Inc stock has a Value Grade of B.
• Bankwell Financial Group Inc stock has a Value Grade of A.
• First Farmers and Merchants Corp stock has a Value Grade of A.
• ING Groep NV (ADR) stock has a Value Grade of A.
• Banco Santander SA (ADR) stock has a Value Grade of A.
• TrustCo Bank Corp NY stock has a Value Grade of B.

Now that you have a bit more background about each of the 7 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.

• 7 Undervalued Banks Stocks for Friday, March 15
• Which Is a Better Investment, Ameris Bancorp or Banco Bbva Argentina SA (ADR) Stock?
• Which Is a Better Investment, Atlantic Union Bankshares Corp or Banco Bbva Argentina SA (ADR) Stock?
• Which Is a Better Investment, Axos Financial Inc or Banco Bbva Argentina SA (ADR) Stock?

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.