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 Thursday, May 09, 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.

Esquire Financial Holdings Inc’s Value Grade

Value Grade:

Esquire Financial Holdings, Inc. is a financial holding company, which operates through its subsidiary, Esquire Bank, National Association (the Bank). The Bank is a full-service commercial bank dedicated to serving the financial needs of the legal and small business communities on a national basis, as well as commercial and retail customers in the New York metropolitan market. It offers tailored products and solutions to the legal community and their clients as well as dynamic and flexible payment processing solutions to small business owners, both on a national basis. The Bank also offers traditional banking products for businesses and consumers in its local market area. Its products offered to businesses and consumers include checking, savings, money market, and time deposits, a wide range of commercial and consumer loans, as well as customary banking services. The Bank operates a payment processing platform through third-party Independent Sales Organizations (ISOs).

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.

Esquire Financial Holdings Inc has a Value Score of 63, which is considered to be undervalued.

When you look at Esquire Financial Holdings Inc’s price-to-sales ratio at 3.98 compared to the industry median at 1.86, this company has a higher price relative to revenue compared to its peers. This could make Esquire Financial Holdings Inc’s stock less attractive for value investors.

Esquire Financial Holdings Inc’s price-earnings ratio is 10.82 compared to the industry median at 10.36. This means it has a higher share price relative to earnings compared to its peers. This could make Esquire Financial Holdings Inc less attractive for value investors.

Now, let’s assess Esquire Financial Holdings Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 5.5, when compared to the industry median of 7.3, the company may be considered undervalued 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. Esquire Financial Holdings Inc’s shareholder yield is lower than its industry median ratio of 3.49%. 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. Esquire Financial Holdings Inc’s price-to-book ratio is higher than its industry median ratio of 0.89. This could make Esquire Financial Holdings Inc less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Esquire Financial Holdings Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Esquire Financial Holdings Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 11.74. This could make Esquire Financial Holdings Inc more attractive because the lower P/FCF ratio indicates that Esquire Financial Holdings 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.

First Horizon Corp’s Value Grade

Value Grade:

First Horizon Corporation is a bank holding company, which provides diversified financial services primarily through its principal subsidiary, First Horizon Bank (the Bank). The Company operates through three segments: Regional Banking, Specialty Banking, and Corporate. The principal lines of business in the regional banking segment include commercial banking, business banking, consumer banking, private client, and wealth management. This segment also provides investment, wealth management, financial planning, trust and asset management services for consumer clients. The principal lines of business in the specialty banking segment include fixed income/capital markets, professional commercial real estate, mortgage warehouse lending, asset-based (secured) lending, franchise finance, equipment finance, energy finance, healthcare finance, and tax credit finance. This segment also delivers treasury management solutions, loan syndications, and international banking.

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 Horizon Corp has a Value Score of 79, which is considered to be undervalued.

First Horizon Corp’s price-earnings ratio is 11.0 compared to the industry median at 10.4. This means that it has a higher price relative to its earnings compared to its peers. This makes First Horizon Corp less attractive for value investors.

First Horizon Corp’s price-to-book ratio is lower than its peers. This could make First Horizon Corp more attractive for value investors when compared to the industry median at 0.89.

You can read more about First Horizon 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.

Finward Bancorp’s Value Grade

Value Grade:

Finward Bancorp is the holding company for Peoples Bank, an Indiana-chartered commercial bank (the Bank). The Bank is primarily engaged in the business of attracting deposits from the general public and the origination of loans, mostly upon the security of single family residences and commercial real estate, as well as, construction loans and various types of consumer loans, commercial business loans and municipal loans, within its primary market areas of Lake and Porter Counties, in Northwest Indiana, and Cook County, Illinois. The Company offers consumer loans to individuals for personal, household or family purposes. Consumer loans are either secured by adequate collateral, or unsecured. In addition, the Company's Wealth Management Group provides estate and retirement planning, custodial services, guardianships, IRA accounts, investment agency accounts, serves as the personal representative of estates, and acts as corporate trustee for revocable and irrevocable trusts.

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.

Finward Bancorp has a Value Score of 87, which is considered to be undervalued.

Finward Bancorp’s price-earnings ratio is 6.8 compared to the industry median at 10.4. This means that it has a lower price relative to its earnings compared to its peers. This makes Finward Bancorp more attractive for value investors.

Finward Bancorp’s price-to-book ratio is higher than its peers. This could make Finward Bancorp less attractive for value investors when compared to the industry median at 0.89.

You can read more about Finward 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.

WSFS Financial Corporation’s Value Grade

Value Grade:

WSFS Financial Corporation is a savings and loan holding company. The Company operates through its subsidiary, Wilmington Savings Fund Society, FSB (the Bank). The Company’s segments include WSFS Bank, Cash Connect and Wealth Management. The WSFS Bank segment provides loans and leases, deposits and other financial products to commercial and consumer customers. WSFS Bank also offers a variety of consumer loan products, retail securities and insurance brokerage services through its branches, and mortgage and title services through WSFS Mortgage. Its Cash Connect segment provides ATM vault cash, smart safe and cash logistics services in the United States, servicing non-bank ATMs and smart safes nationwide and supporting ATMs for WSFS Bank Customers. The Wealth Management segment provides a range of planning and advisory services, investment management, personal and institutional trust services, and credit and deposit products to individual, corporate, and institutional clients.

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.

WSFS Financial Corporation has a Value Score of 76, which is considered to be undervalued.

WSFS Financial Corporation’s price-earnings ratio is 10.3 compared to the industry median at 10.4. This means that it has a lower price relative to its earnings compared to its peers. This makes WSFS Financial Corporation more attractive for value investors.

WSFS Financial Corporation’s price-to-book ratio is lower than its peers. This could make WSFS Financial Corporation more attractive for value investors when compared to the industry median at 0.89.

You can read more about WSFS Financial Corporation’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.

• Esquire Financial Holdings Inc stock has a Value Grade of B.
• First Horizon Corp stock has a Value Grade of B.
• Finward Bancorp stock has a Value Grade of A.
• WSFS Financial Corporation 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 Thursday, May 09
• 3 Undervalued Banks Stocks for Wednesday, May 08
• Which Is a Better Investment, Ameris Bancorp or Merchants Bancorp Stock?
• Which Is a Better Investment, Atlantic Union Bankshares Corp or Merchants Bancorp 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.