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 19, 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.

First of Long Island Corp’s Value Grade

Value Grade:

The First of Long Island Corporation is a one bank holding company. It provides financial services through its wholly owned subsidiary, The First National Bank of Long Island (the Bank). The Bank serves the financial needs of small to middle market businesses, professional service firms, not-for-profits, municipalities and consumers primarily in Nassau and Suffolk Counties of Long Island, and the boroughs of New York City (NYC). The Bank’s loan portfolio is primarily comprised of loans to borrowers on Long Island and in the boroughs of NYC, and its real estate loans are principally secured by properties located in those areas. The Bank’s investment securities portfolio consists of direct obligations of the United States government and its agencies, obligations of the small business administration (SBA), corporate bonds of large United States financial institutions and obligations of states and political subdivisions. The Bank offers trust, estate, custody, and investment 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.

First of Long Island Corp has a Value Score of 70, which is considered to be undervalued.

When you look at First of Long Island Corp’s price-to-sales ratio at 1.48 compared to the industry median at 1.81, this company has a lower price relative to revenue compared to its peers. This could make First of Long Island Corp’s stock more attractive for value investors.

First of Long Island Corp’s price-earnings ratio is 8.77 compared to the industry median at 9.44. This means it has a lower share price relative to earnings compared to its peers. This could make First of Long Island Corp more attractive for value investors.

Now, let’s assess First of Long Island Corp’s EV/EBITDA ratio, also known as enterprise multiple. At 14.3, 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. First of Long Island Corp’s shareholder yield is higher than its industry median ratio of 3.75%. 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. First of Long Island Corp’s price-to-book ratio is lower than its industry median ratio of 0.88. This could make First of Long Island Corp more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at First of Long Island Corp’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. First of Long Island Corp’s price-to-free-cash-flow ratio is higher than its industry median ratio of 10.50. This could make First of Long Island Corp less attractive because the higher P/FCF ratio indicates that First of Long Island 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.

Heritage Financial Corp’s Value Grade

Value Grade:

Heritage Financial Corporation is a bank holding company. The Company is primarily engaged in the business of planning, directing, and coordinating the business activities of its wholly owned subsidiary, Heritage Bank (the Bank). Its business consists primarily commercial lending and deposit relationships with small and medium-sized businesses and their owners in its market areas and attracting deposits from the general public. It also makes real estate construction and land development loans, consumer loans and residential real estate loans for sale or investment purposes on residential properties located primarily in its market. It offers a full range of products and services to customers for personal and business banking needs designed to attract both short-term and long-term deposits. It also offers investment advice through a wealth management department that provides objective advice from trusted advisers. The Bank conducts business from its approximately 50 branch 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.

Heritage Financial Corp has a Value Score of 83, which is considered to be undervalued.

Heritage Financial Corp’s price-earnings ratio is 10.0 compared to the industry median at 9.4. This means that it has a higher price relative to its earnings compared to its peers. This makes Heritage Financial Corp less attractive for value investors.

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

You can read more about Heritage Financial 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.

HarborOne Bancorp Inc’s Value Grade

Value Grade:

HarborOne Bancorp, Inc. is the bank holding company for HarborOne Bank (the Bank). Its segments include HarborOne Bank and HarborOne Mortgage. The Bank segment provides consumer and business banking products and services to individuals, businesses and municipalities. Consumer products include loan and deposit products, and business banking products include loans for working capital, inventory and general corporate use, commercial real estate construction loans, and deposit accounts. The HarborOne Mortgage segment consists of originating residential mortgage loans primarily for sale in the secondary market and the servicing of those loans. It provides a variety of financial services to individuals and businesses through its 30 full-service bank branches, and a commercial lending office in each of Boston and Providence. It also provides a range of educational services through HarborOne U, with digital content, webinars, and recordings for small business and personal financial education.

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.

HarborOne Bancorp Inc has a Value Score of 76, which is considered to be undervalued.

HarborOne Bancorp Inc’s price-earnings ratio is 25.9 compared to the industry median at 9.4. This means that it has a higher price relative to its earnings compared to its peers. This makes HarborOne Bancorp Inc less attractive for value investors.

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

You can read more about HarborOne 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.

Richmond Mutual Bancorporation Inc’s Value Grade

Value Grade:

Richmond Mutual Bancorporation, Inc. is a holding company for First Bank Richmond, an Indiana state-chartered commercial bank. The Company's principal business consists of attracting deposits from the general public, as well as brokered deposits, and investing those funds primarily in loans secured by commercial and multi-family real estate, first mortgages on owner-occupied, one-to four-family residences, a variety of consumer loans, direct financing leases and commercial and industrial loans. It offers a full range of lending products, including multi-family and commercial real estate loans, commercial and industrial loans, construction and development loans, residential real estate loans, including home equity loans and lines of credit, and consumer loans. It also engages in lease financing, which consists of direct financing leases and is used by its commercial customers to finance purchases of equipment. It also provides trust and wealth management 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.

Richmond Mutual Bancorporation Inc has a Value Score of 76, which is considered to be undervalued.

Richmond Mutual Bancorporation Inc’s price-earnings ratio is 12.8 compared to the industry median at 9.4. This means that it has a higher price relative to its earnings compared to its peers. This makes Richmond Mutual Bancorporation Inc less attractive for value investors.

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

You can read more about Richmond Mutual Bancorporation 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.

• First of Long Island Corp stock has a Value Grade of B.
• Heritage Financial Corp stock has a Value Grade of A.
• HarborOne Bancorp Inc stock has a Value Grade of B.
• Richmond Mutual Bancorporation 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 19
• 5 Undervalued Banks Stocks for Thursday, April 18
• What You Need to Know About BancFirst Corp's Q1 Earnings
• What You Need to Know About Berkshire Hills Bancorp Inc's Q1 Earnings

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.