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 26, 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.

F & M Bank Corp’s Value Grade

Value Grade:

F & M Bank Corp. is a one-bank holding company. The Company operates through its banking subsidiaries, Farmers & Merchants Bank (Bank) and VSTitle, LLC (VST). The Bank is a state-chartered bank. As a commercial bank, the Bank offers a range of banking services, including commercial and individual demand and time deposit accounts, commercial and individual loans, Internet and mobile banking, drive-in banking services, automated teller machines (ATMs), as well as a courier service for its commercial banking customers. The Bank provides various types of commercial and consumer loans and has a large portfolio of residential mortgages and indirect auto loans. VST provides title insurance services to the customers in its market area, including VBS Mortgage, LLC (F&M; Mortgage) and the Bank. The Bank operates approximately 14 branches and a dealer finance division in the Shenandoah Valley of Virginia. The Dealer Finance Division specializes in providing automobile financing.

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.

F & M Bank Corp has a Value Score of 82, which is considered to be undervalued.

When you look at F & M Bank Corp’s price-to-sales ratio at 0.95 compared to the industry median at 1.83, this company has a lower price relative to revenue compared to its peers. This could make F & M Bank Corp’s stock more attractive for value investors.

F & M Bank Corp’s price-earnings ratio is 19.31 compared to the industry median at 9.90. This means it has a higher share price relative to earnings compared to its peers. This could make F & M Bank Corp less attractive for value investors.

Now, let’s assess F & M Bank Corp’s EV/EBITDA ratio, also known as enterprise multiple. At 7.9, when compared to the industry median of 7.1, 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. F & M Bank Corp’s shareholder yield is higher than its industry median ratio of 3.63%. 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. F & M Bank Corp’s price-to-book ratio is lower than its industry median ratio of 0.90. This could make F & M Bank Corp more attractive to investors looking for a new addition to their portfolio.

Hilltop Holdings Inc.’s Value Grade

Value Grade:

Hilltop Holdings Inc. is a diversified financial holding company. The Company operates through three segments: banking, broker-dealer, and mortgage origination. The banking segment includes the operations of PlainsCapital Bank (the Bank). The banking segment primarily provides business and consumer banking services from offices located throughout Texas and generates revenue from its portfolio of earning assets. The broker-dealer segment includes the operations of Securities Holdings, which operates through its wholly owned subsidiaries, Hilltop Securities, Momentum Independent Network and Hilltop Securities Asset Management, LLC. This segment offers investment advisory and securities brokerage services. The mortgage origination segment includes the operations of PrimeLending, which offers a variety of loan products. This segment includes origination and servicing of loans and selling these loans in the secondary market.

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.

Hilltop Holdings Inc. has a Value Score of 79, which is considered to be undervalued.

Hilltop Holdings Inc.’s price-earnings ratio is 17.7 compared to the industry median at 9.9. This means that it has a higher price relative to its earnings compared to its peers. This makes Hilltop Holdings Inc. less attractive for value investors.

Hilltop Holdings Inc.’s price-to-book ratio is lower than its peers. This could make Hilltop Holdings Inc. fairly attractive for value investors when compared to the industry median at 0.90.

You can read more about Hilltop Holdings 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.

Investar Holding Corp’s Value Grade

Value Grade:

Investar Holding Corporation is a financial holding company that conducts its operations primarily through its subsidiary, Investar Bank, National Association (the Bank). The Company offers a range of commercial and retail lending products throughout its market areas, including business loans to small to medium-sized businesses as well as loans to individuals. Its business lending products include owner-occupied commercial real estate loans, construction loans and commercial and industrial loans, such as term loans, equipment financing and lines of credit, while its loans to individuals include first and second mortgage loans, installment loans, and lines of credit. It offers a base of deposit products and services to individual and business clients, including savings, checking, and money market accounts, as well as a variety of certificates of deposit and individual retirement accounts. It also offers debit cards, Internet banking, direct deposit of payroll and social security checks.

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.

Investar Holding Corp has a Value Score of 93, which is considered to be undervalued.

Investar Holding Corp’s price-earnings ratio is 9.6 compared to the industry median at 9.9. This means that it has a lower price relative to its earnings compared to its peers. This makes Investar Holding Corp more attractive for value investors.

Investar Holding Corp’s price-to-book ratio is higher than its peers. This could make Investar Holding Corp less attractive for value investors when compared to the industry median at 0.90.

You can read more about Investar Holding 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.

QNB Corp’s Value Grade

Value Grade:

QNB Corp. is the holding company for QNB Bank (the Bank). The Bank is engaged in the general commercial banking business and provides a full range of banking services to its customers. These banking services consist of attracting deposits and using these funds in making commercial loans, residential mortgage loans, consumer loans, purchasing investment securities and others. These deposits are in the form of time, demand and savings accounts. Time deposits include certificates of deposit and individual retirement accounts. The Bank's demand and savings accounts include money market accounts, interest-bearing demand accounts (including a higher yielding checking account), club accounts, traditional statement savings accounts, and a higher yielding online savings account. It provides securities and advisory services under the name of QNB Financial Services through a registered Broker/Dealer and Registered Investment Advisor, and title insurance as a member of Laurel Abstract Company LLC.

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.

QNB Corp has a Value Score of 89, which is considered to be undervalued.

QNB Corp’s price-earnings ratio is 9.0 compared to the industry median at 9.9. This means that it has a lower price relative to its earnings compared to its peers. This makes QNB Corp more attractive for value investors.

QNB Corp’s price-to-book ratio is lower than its peers. This could make QNB Corp fairly attractive for value investors when compared to the industry median at 0.90.

You can read more about QNB 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.

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.

• F & M Bank Corp stock has a Value Grade of A.
• Hilltop Holdings Inc. stock has a Value Grade of B.
• Investar Holding Corp stock has a Value Grade of A.
• QNB Corp stock has a Value Grade of A.

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 26
• Which Is a Better Investment, Banco Bilbao Vizcaya Argentaria SA (ADR) or Barclays PLC (ADR) Stock?
• Which Is a Better Investment, Banco Bradesco SA (ADR) or Barclays PLC (ADR) Stock?
• Which Is a Better Investment, Banco de Chile (ADR) or Barclays PLC (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.