Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 7 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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7 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 7 undervalued stocks in the Banks industry for Thursday, May 23, 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.

Capitol Federal Financial, Inc.’s Value Grade

Value Grade:

Capitol Federal Financial, Inc. is a unitary savings and loan holding company. The Company provides a full range of retail banking services through its subsidiary, Capitol Federal Savings Bank (the Bank), a federal savings bank, which has 46 traditional and five in-store banking offices serving primarily the metropolitan areas of Topeka, Wichita, Lawrence, Manhattan, Emporia and Salina, Kansas and portions of the Kansas City metropolitan area. The Bank attracts deposits primarily from the general public and from businesses and invests those funds primarily in permanent loans secured by first mortgages on owner-occupied, one-to four-family residences and in commercial loans. It offers an array of retail and business deposit products and services. These products include checking, savings, money market, certificates of deposit, and retirement accounts. The Bank’s deposit services are provided through its network of traditional branches and retail in-store locations, its call center.

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.

Capitol Federal Financial, Inc. has a Value Score of 90, which is considered to be undervalued.

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

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. Capitol Federal Financial, Inc.’s shareholder yield is higher than its industry median ratio of 3.43%. 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. Capitol Federal Financial, Inc.’s price-to-book ratio is lower than its industry median ratio of 0.90. This could make Capitol Federal Financial, Inc. more attractive to investors looking for a new addition to their portfolio.

Codorus Valley Bancorp, Inc.’s Value Grade

Value Grade:

Codorus Valley Bancorp, Inc. is a bank holding company. PeoplesBank is its wholly owned bank subsidiary. PeoplesBank is a Pennsylvania chartered bank that offers a full range of consumer, business, wealth management, and mortgage services at financial centers located in communities throughout South Central Pennsylvania and Central Maryland. In addition to the twenty-two full service financial centers, it has eight financial centers located primarily within retirement communities that provide a full suite of services. PeoplesBank is focused on acquiring and nurturing financial relationships with small and mid-sized businesses. The Company's business is with clients located within South Central Pennsylvania, principally York and Lancaster Counties and North Central Maryland, principally Harford County and Baltimore County. Its subsidiary, Codorus Valley Financial Advisors, Inc. d/b/a PeoplesWealth Advisors, which sells non-deposit investment products.

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.

Codorus Valley Bancorp, Inc. has a Value Score of 74, which is considered to be undervalued.

Codorus Valley Bancorp, Inc.’s price-earnings ratio is 9.8 compared to the industry median at 10.3. This means that it has a lower price relative to its earnings compared to its peers. This makes Codorus Valley Bancorp, Inc. more attractive for value investors.

Codorus Valley Bancorp, Inc.’s price-to-book ratio is lower than its peers. This could make Codorus Valley Bancorp, Inc. more attractive for value investors when compared to the industry median at 0.90.

You can read more about Codorus Valley 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.

Dime Community Bancshares Inc’s Value Grade

Value Grade:

Dime Community Bancshares, Inc. is a bank holding company. The Company is engaged in providing commercial banking and financial services through its wholly owned subsidiary, Dime Community Bank (the Bank). It is engaged in providing full-service commercial and consumer banking services, including accepting time, savings and demand deposits from the businesses, consumers, and local municipalities. It also offers the Certificate of Deposit Account Registry Service (CDARS) and Insured Cash Sweep (ICS) programs. In addition, it offers merchant credit and debit card processing, automated teller machines, cash management services, lockbox processing, online banking services, remote deposit capture, safe deposit boxes, and individual retirement accounts as well as investment services through Dime Financial Services LLC. Through its title insurance subsidiary, the Bank acts as a broker for title insurance services. It operates 60 branch locations throughout Long Island and the New York City.

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.

Dime Community Bancshares Inc has a Value Score of 93, which is considered to be undervalued.

Dime Community Bancshares Inc’s price-earnings ratio is 11.0 compared to the industry median at 10.3. This means that it has a higher price relative to its earnings compared to its peers. This makes Dime Community Bancshares Inc less attractive for value investors.

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

You can read more about Dime Community 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.

Exchange Bank’s Value Grade

Value Grade:

Exchange Bank (the Bank) is a full-service community bank. The Bank provides a range of personal, commercial and trust and investment management services with over 16 retail branches in Sonoma County, a commercial branch in Roseville and Trust & Investment Management offices in Santa Rosa, Roseville and Silicon Valley. The Bank's personal banking products and services include checking, savings, personal loans, home loans and credit cards. The Bank's business banking products and services include checking, savings, loans, credit cards and merchant services. Its services include trust administration, investment management, retirement accounts and estate settlement.

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.

Exchange Bank has a Value Score of 89, which is considered to be undervalued.

Exchange Bank’s price-earnings ratio is 10.8 compared to the industry median at 10.3. This means that it has a higher price relative to its earnings compared to its peers. This makes Exchange Bank less attractive for value investors.

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

You can read more about Exchange 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.

Mercantile Bank Corp’s Value Grade

Value Grade:

Mercantile Bank Corporation is the bank holding company for Mercantile Bank (The Bank). The Bank is a state banking company that provides commercial banking services primarily to small- to medium-sized businesses and retail banking services. Its operations are centered around the West and Central portions of Michigan. It also has banking offices located in the metropolitan Detroit, Michigan area, Traverse City, Michigan, Saginaw, Michigan, and Midland, Michigan. It makes secured and unsecured commercial, construction, mortgage and consumer loans, and accepts checking, savings and time deposits. It also enables customers to conduct certain loan and deposit transactions by personal computer and through mobile applications. Its insurance product offerings include private passenger automobiles, homeowners, personal inland marine, boat owners, recreational vehicles, dwelling fire, umbrella policies, small businesses, and life insurance products.

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.

Mercantile Bank Corp has a Value Score of 84, which is considered to be undervalued.

Mercantile Bank Corp’s price-earnings ratio is 7.6 compared to the industry median at 10.3. This means that it has a lower price relative to its earnings compared to its peers. This makes Mercantile Bank Corp more attractive for value investors.

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

You can read more about Mercantile Bank 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.

Northeast Community Bancorp Inc’s Value Grade

Value Grade:

NorthEast Community Bancorp, Inc. is the holding company for NorthEast Community Bank (the Bank). The Bank’s principal business consists of originating primarily construction loans and, to a lesser extent, commercial and industrial loans and multifamily and mixed-use residential real estate loans and non-residential real estate loans. It offers personal loans, loans secured by savings accounts or certificates of deposit (share loans) or statement savings accounts, and overdraft protection for checking accounts. It offers adjustable-rate mortgage loans secured by multifamily and mixed-use real estate. These loans are comprised primarily of loans on moderate income apartment buildings located in its lending territory and include loans on cooperative apartment buildings (in the New York area), and loans for Section 8 multifamily housing. The Bank offers investment advisory and financial planning services under Harbor West Financial Planning Wealth Management a division of the Company.

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.

Northeast Community Bancorp Inc has a Value Score of 97, which is considered to be undervalued.

Northeast Community Bancorp Inc’s price-earnings ratio is 5.2 compared to the industry median at 10.3. This means that it has a lower price relative to its earnings compared to its peers. This makes Northeast Community Bancorp Inc more attractive for value investors.

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

You can read more about Northeast Community 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.

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 64, which is considered to be undervalued.

United Bankshares Inc’s price-earnings ratio is 12.8 compared to the industry median at 10.3. 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 fairly attractive for value investors when compared to the industry median at 0.90.

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 7 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.

• Capitol Federal Financial, Inc. stock has a Value Grade of A.
• Codorus Valley Bancorp, Inc. stock has a Value Grade of B.
• Dime Community Bancshares Inc stock has a Value Grade of A.
• Exchange Bank stock has a Value Grade of A.
• Mercantile Bank Corp stock has a Value Grade of A.
• Northeast Community Bancorp Inc stock has a Value Grade of A.
• United Bankshares Inc stock has a Value Grade of B.

Now that you have a bit more background about each of the 7 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.

• 7 Undervalued Banks Stocks for Thursday, May 23
• Which Is a Better Investment, Banco Bbva Argentina SA (ADR) or Banco Macro SA (ADR) Stock?
• 3 Undervalued Banks Stocks for Wednesday, May 22
• Which Is a Better Investment, Associated Banc-Corp or Provident Financial Services, Inc. Stock?

AAII Disclaimer

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