Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 6 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.

Click the button below to learn more about A+ Investor and subscribe today.

6 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 6 undervalued stocks in the Banks industry for Monday, May 13, 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.

AMB Financial Corp.’s Value Grade

Value Grade:

AMB Financial Corp. is a bank holding company for American Community Bank of Indiana (the Bank). The Company’s primary market area consists of the northwest portion of Lake County, Indiana. The Bank is a community-oriented institution whose business consists primarily of accepting deposits from customers within its market area and investing those funds in mortgage loans secured by residential and non-residential real estate as well as non-real estate commercial and consumer loans. The Company also invests in mortgage-backed and other investment securities. Its personal banking services include checking accounts, savings accounts, money market, digital banking, credit cards, investments, and deposit rates. Its business banking services include business checking, business lending, merchant services, remote deposits, and receivables financing. It also offers personal online banking, business online banking and business mobile apps.

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.

AMB Financial Corp. has a Value Score of 80, which is considered to be undervalued.

When you look at AMB Financial Corp.’s price-to-sales ratio at 0.96 compared to the industry median at 1.88, this company has a lower price relative to revenue compared to its peers. This could make AMB Financial Corp.’s stock more attractive for value investors.

AMB Financial Corp.’s price-earnings ratio is 8.99 compared to the industry median at 10.37. This means it has a lower share price relative to earnings compared to its peers. This could make AMB Financial Corp. more attractive for value investors.

Now, let’s assess AMB Financial Corp.’s EV/EBITDA ratio, also known as enterprise multiple. At 5.3, when compared to the industry median of 7.1, 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. AMB Financial Corp.’s shareholder yield is lower than its industry median ratio of 3.50%. 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. AMB Financial Corp.’s price-to-book ratio is lower than its industry median ratio of 0.89. This could make AMB Financial Corp. more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at AMB Financial Corp.’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. AMB Financial Corp.’s price-to-free-cash-flow ratio is higher than its industry median ratio of 11.22. This could make AMB Financial Corp. less attractive because the higher P/FCF ratio indicates that AMB Financial 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.

ECB Bancorp Inc’s Value Grade

Value Grade:

ECB Bancorp, Inc. is a bank holding company for Everett Co-operative Bank (the Bank). The Bank's business consists primarily of taking deposits from the general public and investing those deposits, together with funds generated from operations, in one-to-four family residential real estate loans, commercial real estate and multifamily real estate loans, construction and land loans and home equity lines of credit and loans. It also invests in securities, consisting primarily of United States government and federal agency obligations, mortgage-backed securities and corporate bonds. It offers a variety of deposit accounts, including certificates of deposit accounts, IRAs, money market accounts, savings accounts and both interest-bearing and noninterest-bearing checking accounts. It considers its deposit market area to be Middlesex, Essex and Suffolk Counties, Massachusetts and, its primary lending area to be these counties, as well as Norfolk County, Massachusetts.

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.

ECB Bancorp Inc has a Value Score of 63, which is considered to be undervalued.

ECB Bancorp Inc’s price-earnings ratio is 24.3 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 ECB Bancorp Inc less attractive for value investors.

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

You can read more about ECB 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.

First Farmers and Merchants Corp’s Value Grade

Value Grade:

First Farmers and Merchants Corporation is the holding company for First Farmers and Merchants Bank (the Bank). The Bank is a community bank serving the Middle Tennessee area through about 22 offices in seven Middle Tennessee counties. The Bank is primarily engaged in providing a range of banking and financial services, including lending, investing of funds, obtaining deposits, trust and wealth management operations, and other financing activities to individual and corporate customers in the Middle Tennessee area. The Bank’s personal banking includes retire and invest, credit cards, personal lending, and online and mobile banking. The Bank’s business banking includes business retire and invest, business treasury management, business loans, business credit cards, and business online and mobile banking. The Bank’s wealth management and trust services include asset management, trust services, estate administration, and family office service.

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 Farmers and Merchants Corp has a Value Score of 91, which is considered to be undervalued.

First Farmers and Merchants Corp’s price-earnings ratio is 8.0 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 First Farmers and Merchants Corp more attractive for value investors.

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

You can read more about First Farmers and Merchants 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.

First Ottawa Bancshares Inc’s Value Grade

Value Grade:

First Ottawa Bancshares, Inc. is a bank holding company. The Company’s principal activity is the ownership and management of its subsidiary, American Commercial Bank & Trust, National Association (the Bank). The Bank is primarily engaged in providing a full range of banking and financial services to individual and corporate customers in LaSalle, Grundy, Cook, and surrounding counties in Illinois. Its portfolio segments include commercial real estate, commercial non-real estate, construction, and land development, agricultural, residential, and consumer. The Bank's business banking includes business accounts, cash management, commercial lending, and farm management and agricultural lending. Its personal banking includes checking and savings, certificate of deposits and individual retirement accounts (IRAs), consumer lending, online and mobile banking, safe deposit boxes, and wealth management services. Its residential lending services include Residential Loans and Home Equity Loans.

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 Ottawa Bancshares Inc has a Value Score of 82, which is considered to be undervalued.

First Ottawa Bancshares Inc’s price-earnings ratio is 6.9 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 First Ottawa Bancshares Inc more attractive for value investors.

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

You can read more about First Ottawa 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.

Firstsun Capital Bancorp’s Value Grade

Value Grade:

FirstSun Capital Bancorp is a financial holding company. The Company provides a full spectrum of deposit, lending, treasury management, wealth management and online banking products and services through its two wholly owned subsidiaries, Sunflower Bank, National Association (the Bank), Logia Portfolio Management, LLC and FEIF Capital Partners, LLC. The Bank offers a range of specialized financial services to business customers as well as relationship-focused services for its customers and has a branch network in Texas, Kansas, Colorado, New Mexico, Arizona and Washington, as well as mortgage banking capabilities in 43 states. Its product line includes commercial loans and commercial real estate loans, residential mortgage and other consumer loans, a variety of commercial, consumer and private banking deposit products, including noninterest-bearing accounts, interest-bearing demand products, money market accounts and certificates of deposit and treasury management products and 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.

Firstsun Capital Bancorp has a Value Score of 77, which is considered to be undervalued.

Firstsun Capital Bancorp’s price-earnings ratio is 8.3 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 Firstsun Capital Bancorp more attractive for value investors.

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

You can read more about Firstsun Capital 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.

United Bankshares Inc’s Value Grade

Value Grade:

United Bankshares, Inc. is a financial holding company. The Company's segments include community banking and mortgage banking. The community banking segment includes both commercial and consumer lending and provides customers with such products as commercial loans, real estate loans, business financing and consumer loans. In addition, this segment provides customers with several choices of deposit products including demand deposit accounts, savings accounts and certificates of deposit as well as investment and financial advisory services to businesses and individuals, including financial planning, retirement/estate planning, and investment management. The mortgage banking segment engages primarily in the origination and acquisition of residential mortgages for sale into the secondary market though United’s mortgage banking subsidiaries, George Mason and Crescent. The Company has one banking subsidiary doing business under the name of United Bank. It also owns nonbank subsidiaries.

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.

United Bankshares Inc has a Value Score of 61, which is considered to be undervalued.

United Bankshares Inc’s price-earnings ratio is 13.1 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 United Bankshares Inc less attractive for value investors.

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

You can read more about United Bankshares 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 6 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.

• AMB Financial Corp. stock has a Value Grade of B.
• ECB Bancorp Inc stock has a Value Grade of B.
• First Farmers and Merchants Corp stock has a Value Grade of A.
• First Ottawa Bancshares Inc stock has a Value Grade of A.
• Firstsun Capital Bancorp stock has a Value Grade of B.
• United Bankshares Inc stock has a Value Grade of B.

Now that you have a bit more background about each of the 6 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.

• 6 Undervalued Banks Stocks for Monday, May 13
• Which Is a Better Investment, Barclays PLC (ADR) or Societe Generale SA (ADR) Stock?
• Which Is a Better Investment, Discover Financial Services or Societe Generale SA (ADR) Stock?
• 3 Undervalued Banks Stocks for Friday, May 10

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.