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 Friday, April 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.

Eastern Bankshares Inc’s Value Grade

Value Grade:

Eastern Bankshares, Inc. is the stock holding company for Eastern Bank (The Bank). Through the Bank, it provides a variety of banking and trust and investment services. Its diversified products and services include lending, deposit, and wealth management. It offers a range of demand deposit accounts, interest checking accounts, money market accounts, savings accounts, and time certificates of deposit accounts. Its banking business consists of a full range of banking, lending (commercial, residential and consumer), savings and small business offerings, including its wealth management and trust operations that it conducts through its Eastern Wealth Management division. It offers automated lock box collection services, cash management services and account reconciliation services to its corporate and institutional customers, as well as cash management services to its municipal clients. Its securities portfolio consists of government-sponsored residential mortgage-backed securities.

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.

Eastern Bankshares Inc has a Value Score of 72, which is considered to be undervalued.

When you look at Eastern Bankshares Inc’s price-to-sales ratio at 2.68 compared to the industry median at 1.88, this company has a higher price relative to revenue compared to its peers. This could make Eastern Bankshares Inc’s stock less 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. Eastern Bankshares 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. Eastern Bankshares Inc’s price-to-book ratio is lower than its industry median ratio of 0.91. This could make Eastern Bankshares Inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Eastern Bankshares Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Eastern Bankshares Inc’s price-to-free-cash-flow ratio is higher than its industry median ratio of 11.00. This could make Eastern Bankshares Inc less attractive because the higher P/FCF ratio indicates that Eastern Bankshares 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.

Finwise Bancorp’s Value Grade

Value Grade:

FinWise Bancorp is a bank holding company. The Company operates through its two subsidiaries, FinWise Bank and FinWise Investment, LLC (collectively, the Bank). The Bank provides a full range of banking services to individual and commercial customers. The Bank’s primary source of revenue is from loans including consumer, Small Business Administration (SBA), commercial, commercial real estate, and residential real estate. Its banking business offers a diverse range of commercial and retail banking products and services and consists primarily of originating loans in a variety of sectors. It also attracts nationwide deposits from the general public, businesses and other financial institutions, and invests those deposits, together with borrowings and other sources of funds. The Company’s lending focuses on four main lending areas: SBA 7(a) loans, Strategic Programs, residential and commercial real estate, and commercial leasing.

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.

Finwise Bancorp has a Value Score of 79, which is considered to be undervalued.

Finwise Bancorp’s price-earnings ratio is 7.3 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 Finwise Bancorp more attractive for value investors.

Finwise Bancorp’s price-to-book ratio is higher than its peers. This could make Finwise Bancorp less attractive for value investors when compared to the industry median at 0.91.

You can read more about Finwise 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.

First Northwest BanCorp’s Value Grade

Value Grade:

First Northwest Bancorp is a bank holding company and a financial holding company. The Company is engaged in banking activities through its wholly owned subsidiary, First Fed Bank (the Bank), as well as certain non-banking financial activities. Its non-financial investments include several limited partnership investments, including a 33% interest in The Meriwether Group, LLC (MWG), a boutique investment bank focusing on providing entrepreneurs with resources to help them, including equity and debt-raising services along with strategic positioning of business, throughout the United States. First Fed Bank is a community-oriented financial institution. The Bank operates in 18 locations, including twelve full-service branches, three business centers, and three administration centers located in Clallam, Jefferson, King, Kitsap, and Whatcom counties. It is focused on delivering a full array of financial products and services for individuals, small businesses, and commercial customers.

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 Northwest BanCorp has a Value Score of 62, which is considered to be undervalued.

First Northwest BanCorp’s price-earnings ratio is 60.0 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 First Northwest BanCorp less attractive for value investors.

First Northwest BanCorp’s price-to-book ratio is higher than its peers. This could make First Northwest BanCorp less attractive for value investors when compared to the industry median at 0.91.

You can read more about First Northwest 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.

Bancorp Inc’s Value Grade

Value Grade:

The Bancorp, Inc. is a financial holding company. The Company's segments include Specialty Finance and Payments. Its primary lines of specialty lending include securities-backed lines of credit (SBLOC) and cash value of insurance-backed lines of credit (IBLOC), leasing (direct lease financing), Small Business Administration (SBA) loans and non-SBA commercial real estate (CRE) loans. Its SBLOCs and IBLOCs are loans which are generated through institutional banking affinity groups and are respectively collateralized by marketable securities and the cash value of insurance policies. It offers investment advisor financing to investment advisors. The Company also offers small business loans (SBL), which are comprised primarily of SBA loans and vehicle fleet and, to a lesser extent, other equipment leasing to small and medium sized businesses. Its SBLOCs and IBLOCs are offered in conjunction with brokerage accounts. The Company’s subsidiary is The Bancorp Bank, National Association.

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.

Bancorp Inc has a Value Score of 65, which is considered to be undervalued.

Bancorp Inc’s price-earnings ratio is 9.2 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 Bancorp Inc more attractive for value investors.

Bancorp Inc’s price-to-book ratio is lower than its peers. This could make Bancorp Inc more attractive for value investors when compared to the industry median at 0.91.

You can read more about 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.

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.

• Eastern Bankshares Inc stock has a Value Grade of B.
• Finwise Bancorp stock has a Value Grade of B.
• First Northwest BanCorp stock has a Value Grade of B.
• Bancorp 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 Friday, April 05
• 6 Undervalued Banks Stocks for Thursday, April 04
• Why FVCBankcorp Inc’s (FVCB) Stock Is Up 4.94%
• 4 Undervalued Banks Stocks for Wednesday, April 03

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.