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 Tuesday, May 28, 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.

Ameris Bancorp’s Value Grade

Value Grade:

Ameris Bancorp is a financial holding company, through its subsidiary, Ameris Bank (the Bank) provides a range of banking services to its retail and commercial customers in 164 locations in Georgia, Alabama, Florida, North Carolina and South Carolina. Its segments include the Banking Division, which provides full service financial services, including commercial loans, consumer loans and deposit accounts; the Retail Mortgage Division, which is engaged in origination, sales and servicing of one-to-four family residential mortgage loans; the Warehouse Lending Division is engaged in the origination and servicing of warehouse lines to other businesses are secured by underlying one-to-four family residential mortgage loans and residential mortgage servicing rights; the SBA Division is engaged in the origination, sales and servicing of small business administration loans, and the Premium Finance Division engaged in the origination and servicing of commercial insurance premium finance 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.

Ameris Bancorp has a Value Score of 75, which is considered to be undervalued.

When you look at Ameris Bancorp’s price-to-sales ratio at 2.51 compared to the industry median at 1.84, this company has a higher price relative to revenue compared to its peers. This could make Ameris Bancorp’s stock less attractive for value investors.

Ameris Bancorp’s price-earnings ratio is 11.71 compared to the industry median at 10.16. This means it has a higher share price relative to earnings compared to its peers. This could make Ameris Bancorp less attractive for value investors.

Now, let’s assess Ameris Bancorp’s EV/EBITDA ratio, also known as enterprise multiple. At 7.6, when compared to the industry median of 6.4, 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. Ameris Bancorp’s shareholder yield is lower than its industry median ratio of 3.47%. 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. Ameris Bancorp’s price-to-book ratio is higher than its industry median ratio of 0.89. This could make Ameris Bancorp less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Ameris Bancorp’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Ameris Bancorp’s price-to-free-cash-flow ratio is lower than its industry median ratio of 11.58. This could make Ameris Bancorp more attractive because the lower P/FCF ratio indicates that Ameris Bancorp 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.

Chesapeake Financial Shares Inc’s Value Grade

Value Grade:

Chesapeake Financial Shares, Inc. is a bank holding company. The Company's principal business activity consists of ownership in Chesapeake Bank (the Bank) and Chesapeake Wealth Management, Inc. (CWM). The Bank is a full-service lender and provider of deposit services to individuals and businesses. The Bank operates approximately 16 branches in the Northern Neck, Middle Peninsula, Williamsburg and Richmond. The Bank offers mortgage, commercial, and consumer loans to its customers. Its loan portfolio includes commercial loans, such as non-real estate, commercial real estate, consumer non-real estate, and residential real estate. Its securities available for sale include securities of state and political subdivisions, mortgage-backed securities, and other debt securities. CWM is an independent wealth management firm offering brokerage, trust, and estate 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.

Chesapeake Financial Shares Inc has a Value Score of 92, which is considered to be undervalued.

Chesapeake Financial Shares Inc’s price-earnings ratio is 9.5 compared to the industry median at 10.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Chesapeake Financial Shares Inc more attractive for value investors.

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

You can read more about Chesapeake Financial Shares 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.

Northeast Bank’s Value Grade

Value Grade:

Northeast Bank (the Bank) is a full-service financial institution. The Bank gathers retail deposits through its seven full-service branches in Maine and through its online deposit program, ableBanking; purchase and originate commercial loans, typically secured by real estate, on a nationwide basis through its National Lending Division, and originate loans through the Community Banking Division and Small Business Administration (SBA) National Division. The National Lending Division purchases primarily performing commercial real estate loans, on a nationwide basis, typically at a discount from their unpaid principal balances. The National Lending Division also originates commercial real estate and commercial and industrial loans on a nationwide basis. The SBA National Division originates loans to small businesses to help provide funding opportunities nationally. The Community Banking Division originates loans directly to businesses located in its market area.

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 Bank has a Value Score of 63, which is considered to be undervalued.

Northeast Bank’s price-earnings ratio is 8.1 compared to the industry median at 10.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Northeast Bank more attractive for value investors.

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

You can read more about Northeast 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.

Peoples Financial Services Corp’s Value Grade

Value Grade:

Peoples Financial Services Corp. is a bank holding company, which provides a full range of financial services through its wholly owned subsidiary, Peoples Security Bank and Trust Company, collectively Peoples Bank. Peoples Bank is a state-chartered bank and trust company. It offers a variety of commercial and retail banking services to business, non-profits, governmental, municipal agencies, and professional customers, as well as retail customers, on a personalized basis. Its primary lending products are real estate, commercial and consumer loans. It also offers automated teller machine access, credit cards, active investment accounts, trust department services and other various lending, depository, and related financial services. Its primary deposit products are savings and demand deposit accounts and certificates of deposit. Its retail lending products include the various types of loans, including residential real estate; automobiles; manufactured housing; personal and home equity.

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.

Peoples Financial Services Corp has a Value Score of 73, which is considered to be undervalued.

Peoples Financial Services Corp’s price-earnings ratio is 12.6 compared to the industry median at 10.2. This means that it has a higher price relative to its earnings compared to its peers. This makes Peoples Financial Services Corp less attractive for value investors.

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

You can read more about Peoples Financial Services 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.

• Ameris Bancorp stock has a Value Grade of B.
• Chesapeake Financial Shares Inc stock has a Value Grade of A.
• Northeast Bank stock has a Value Grade of B.
• Peoples Financial Services Corp 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 Tuesday, May 28
• 3 Undervalued Banks Stocks for Monday, May 27
• 3 Undervalued Banks Stocks for Friday, May 24
• Why Grupo Financiero Galicia S.A. (ADR)’s (GGAL) Stock Is Up 4.78%

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.