Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 5 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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5 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 5 undervalued stocks in the Banks industry for Friday, April 12, 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.

Camden National Corporation’s Value Grade

Value Grade:

Camden National Corporation is a bank holding company for Camden National Bank (the Bank). The Bank provides a broad array of banking and other financial services to consumer, institutional, municipal, non-profit, and commercial customers. The Bank optimizes its in-person professional financial guidance with technology, delivered through sophisticated digital channels. These digital products empower customers to bank anywhere at any time, including, but not limited to, online and mobile banking, which includes MortgageTouch, its easy-to-use online platform for consumer borrowers; BusinessTouch, its online loan application system with instant approval, making borrowing faster and easier for small businesses, and TreasuryLink, its secure online platform designed to offer advanced cash management, monitoring capabilities and controls for commercial customers. The Bank offers comprehensive wealth management and trust services, including investment advisory 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.

Camden National Corporation has a Value Score of 82, which is considered to be undervalued.

When you look at Camden National Corporation’s price-to-sales ratio at 1.94 compared to the industry median at 1.84, this company has a higher price relative to revenue compared to its peers. This could make Camden National Corporation’s stock less attractive for value investors.

Camden National Corporation’s price-earnings ratio is 10.15 compared to the industry median at 9.56. This means it has a higher share price relative to earnings compared to its peers. This could make Camden National Corporation less attractive for value investors.

Now, let’s assess Camden National Corporation’s EV/EBITDA ratio, also known as enterprise multiple. At 7.1, 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. Camden National Corporation’s shareholder yield is higher than its industry median ratio of 3.67%. 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. Camden National Corporation’s price-to-book ratio is higher than its industry median ratio of 0.88. This could make Camden National Corporation fairly attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Camden National Corporation’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Camden National Corporation’s price-to-free-cash-flow ratio is higher than its industry median ratio of 10.82. This could make Camden National Corporation less attractive because the higher P/FCF ratio indicates that Camden National Corporation 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.

First Bancshares Inc (Missouri)’s Value Grade

Value Grade:

First Bancshares, Inc. is a holding company for Stockmens Bank (the Bank). The Bank provides its customers with a range of community banking services. The Bank is engaged in the business of attracting deposits from, and making loans to, the general public, including individuals and businesses. It originates real estate loans, including one-to-four family residential mortgage loans, multi-family residential loans, commercial real estate loans, agricultural real estate loans and home equity loans and non-real estate loans, including commercial business, agricultural business and consumer loans. It also invests in mortgage-back securities, United States Government and agency securities and other assets. It conducts its business from its home office in Colorado Springs, Colorado, and eight full-service Missouri offices in Mountain Grove, Marshfield, Ava, Kissee, Mills, Gainesville, Crane, Hartville and Springfield, and full-service offices in Bartley, Nebraska and Akron, Colorado.

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 Bancshares Inc (Missouri) has a Value Score of 75, which is considered to be undervalued.

First Bancshares Inc (Missouri)’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 First Bancshares Inc (Missouri) more attractive for value investors.

First Bancshares Inc (Missouri)’s price-to-book ratio is lower than its peers. This could make First Bancshares Inc (Missouri) more attractive for value investors when compared to the industry median at 0.88.

You can read more about First Bancshares Inc (Missouri)’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.

FS Bancorp Inc’s Value Grade

Value Grade:

FS Bancorp, Inc. is the holding company for 1st Security Bank of Washington (the Bank). The Bank provides loan and deposit services to customers who are predominantly small- and middle-market businesses and individuals in Washington and Oregon. The Bank has two segments: commercial and consumer banking and home lending. The commercial and consumer banking segment provides diversified financial products and services to its commercial and consumer customers through the Bank branches, online banking platforms, mobile banking apps, and telephone banking. These products and services include deposit products, residential, consumer, business and commercial real estate lending portfolios, and cash management services. The home lending segment originates one-to-four-family residential mortgage loans primarily for sale in the secondary markets, as well as loans held for investment. A majority of these mortgage loans are sold to or securitized by FNMA, FHLMC, GNMA or the FHLB of Des Moines.

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.

FS Bancorp Inc has a Value Score of 93, which is considered to be undervalued.

FS Bancorp Inc’s price-earnings ratio is 7.1 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 FS Bancorp Inc more attractive for value investors.

FS Bancorp Inc’s price-to-book ratio is lower than its peers. This could make FS Bancorp Inc fairly attractive for value investors when compared to the industry median at 0.88.

You can read more about FS 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.

Pacific Valley Bank’s Value Grade

Value Grade:

Pacific Valley Bank (the Bank) is a community bank. The Bank's products and services are targeted to customers who operate small and middle-market businesses, professionals, high-net worth individuals, and families residing in Monterey County, California. The Bank serves business and individual customers from three California branch locations, such as Salinas, Monterey, and King City. The Portfolio segments of the Bank include construction and land development, real estate, commercial and agriculture, and consumer loans. The Bank's deposit products include checking, savings and money market and certificates of deposit. The Bank online solutions include business online banking, bill pay, remote deposit capture, positive pay and business e-statements and order checks. The Bank additional services include Debit Card, Incoming Wire Instructions, ATM Locator, Calculators, and others. The Bank provides its customers with the tools and resources they need to make decisions.

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.

Pacific Valley Bank has a Value Score of 63, which is considered to be undervalued.

Pacific Valley Bank’s price-earnings ratio is 8.2 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 Pacific Valley Bank more attractive for value investors.

Pacific Valley Bank’s price-to-book ratio is higher than its peers. This could make Pacific Valley Bank less attractive for value investors when compared to the industry median at 0.88.

You can read more about Pacific Valley Bank’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.

Southside Bancshares Inc’s Value Grade

Value Grade:

Southside Bancshares, Inc. is a bank holding company for Southside Bank. The Company operates through approximately 55 branches, 13 of which are located in grocery stores, in addition to wealth management and trust services, and/or loan production, brokerage or other financial services offices. It is a community-focused financial institution that offers a full range of financial services to individuals, businesses, municipal entities and nonprofit organizations in the communities that it serves. Its consumer loan services include 1-4 family residential loans, home equity loans, home improvement loans, automobile loans and other consumer related loans. Its commercial loan services include commercial real estate loans and municipal loans. The Company's trust and wealth management services include investment management, administration of irrevocable, revocable and testamentary trusts, and custodian services, primarily for individuals and, to a lesser extent, partnerships and corporations.

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.

Southside Bancshares Inc has a Value Score of 71, which is considered to be undervalued.

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

Southside Bancshares Inc’s price-to-book ratio is lower than its peers. This could make Southside Bancshares Inc more attractive for value investors when compared to the industry median at 0.88.

You can read more about Southside 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 5 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.

• Camden National Corporation stock has a Value Grade of A.
• First Bancshares Inc (Missouri) stock has a Value Grade of B.
• FS Bancorp Inc stock has a Value Grade of A.
• Pacific Valley Bank stock has a Value Grade of B.
• Southside Bancshares Inc stock has a Value Grade of B.

Now that you have a bit more background about each of the 5 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.

• 5 Undervalued Banks Stocks for Friday, April 12
• 3 Undervalued Banks Stocks for Thursday, April 11
• 4 Undervalued Banks Stocks for Wednesday, April 10
• Why 1st Source Corp’s (SRCE) Stock Is Down 4.76%

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.