Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 5 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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5 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 5 undervalued stocks in the Banks industry for Wednesday, May 29, 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.

Eagle Bancorp Montana Inc’s Value Grade

Value Grade:

Eagle Bancorp Montana, Inc. is the bank holding company of Opportunity Bank of Montana (the Bank). It provides loan and deposit services to customers who are predominantly small businesses and individuals throughout Montana. It is a diversified lender with a focus on residential mortgage loans, commercial real estate mortgage loans, commercial business loans, agricultural loans and second mortgage/home equity loan products. It offers a variety of deposit accounts. Deposit account terms vary, primarily as to the required minimum balance amount, the amount of time that the funds must remain on deposit and the applicable interest rate. Its current deposit products include certificates of deposit accounts ranging in terms from 90 days to five years, as well as, checking, savings and money market accounts. Individual retirement account (IRA) certificates are included in certificates of deposit. It also originates in commercial real estate, home equity, and consumer and commercial 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.

Eagle Bancorp Montana Inc has a Value Score of 92, which is considered to be undervalued.

When you look at Eagle Bancorp Montana Inc’s price-to-sales ratio at 1.08 compared to the industry median at 1.84, this company has a lower price relative to revenue compared to its peers. This could make Eagle Bancorp Montana Inc’s stock more attractive for value investors.

Eagle Bancorp Montana Inc’s price-earnings ratio is 11.87 compared to the industry median at 10.13. This means it has a higher share price relative to earnings compared to its peers. This could make Eagle Bancorp Montana Inc less attractive for value investors.

Now, let’s assess Eagle Bancorp Montana Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 4.7, when compared to the industry median of 6.4, 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. Eagle Bancorp Montana Inc’s shareholder yield is higher than its industry median ratio of 3.52%. 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. Eagle Bancorp Montana Inc’s price-to-book ratio is lower than its industry median ratio of 0.89. This could make Eagle Bancorp Montana Inc more attractive to investors looking for a new addition to their portfolio.

High Country Bancorp, Inc.’s Value Grade

Value Grade:

High Country Bancorp, Inc. is a bank holding company. The Company has two wholly owned subsidiaries, High Country Bank (the Bank) and B.Ass. Co., Inc. (B.Ass). The Bank is a chartered commercial bank, which provides a variety of financial services for the area it serves. The Bank’s primary deposit products are noninterest-bearing and interest-bearing checking accounts, savings accounts, and time deposit accounts. The Bank’s primary lending products are real estate mortgage, construction, consumer and commercial loans. Deposit accounts of the Bank are insured by the Federal Deposit Insurance Corporation (FDIC) up to certain limitations. The Bank's loan portfolio segments are real estate loans, commercial loans, and consumer and other loans. The Bank pays a premium to the FDIC for the insurance of such deposit accounts. The Bank conducts business through its main office in Salida, Colorado and branch offices in Salida, Buena Vista, Canon City and Longmont, Colorado.

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.

High Country Bancorp, Inc. has a Value Score of 93, which is considered to be undervalued.

High Country Bancorp, Inc.’s price-earnings ratio is 9.0 compared to the industry median at 10.1. This means that it has a lower price relative to its earnings compared to its peers. This makes High Country Bancorp, Inc. more attractive for value investors.

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

You can read more about High Country 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.

Hometrust Bancshares Inc’s Value Grade

Value Grade:

HomeTrust Bancshares, Inc. is the holding company for HomeTrust Bank (the Bank). The Bank is a state-chartered, community-focused financial institution committed to providing value-added relationship banking with over 30 locations, as well as online/mobile channels. Its principal business consists of attracting deposits from the general public and investing those funds, along with borrowed funds, in commercial real estate loans, construction and development loans, commercial and industrial loans, equipment finance leases, municipal leases, loans secured by first and second mortgages on one-to-four family residences, including home equity loans and other consumer loans. It also originates one-to-four family loans, SBA loans and HELOCs to sell to third parties. It invests in debt securities issued by United States Government agencies and GSEs, municipal bonds, corporate bonds, commercial paper and certificates of deposit insured by the Federal Deposit Insurance Corporation.

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.

Hometrust Bancshares Inc has a Value Score of 72, which is considered to be undervalued.

Hometrust Bancshares Inc’s price-earnings ratio is 8.0 compared to the industry median at 10.1. This means that it has a lower price relative to its earnings compared to its peers. This makes Hometrust Bancshares Inc more attractive for value investors.

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

You can read more about Hometrust 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.

Bank Ozk’s Value Grade

Value Grade:

Bank OZK (the Bank) is a regional bank that provides a range of financial solutions. The Bank offers a range of products, including checking, savings, loans, mortgages, treasury management, merchant services, trust and estate services, wealth, and credit cards, among others. Its savings products include certificate of deposits, money market accounts, and individual retirement accounts. Its personal lending options include home equity lines of credit, personal lines of credit and auto loans. It offers both a fixed rate mortgage and an adjustable-rate mortgage. Its online banking enables users to manage their accounts, pay bills, transfer funds, view electronic account statements and others. The Bank also provides individual consultation, financial planning, trust, and investment management services. The Bank conducts banking operations with over 240 offices in eight states, including Arkansas, Georgia, Florida, North Carolina, Texas, New York, California, and Mississippi.

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.

Bank Ozk has a Value Score of 91, which is considered to be undervalued.

Bank Ozk’s price-earnings ratio is 7.7 compared to the industry median at 10.1. This means that it has a lower price relative to its earnings compared to its peers. This makes Bank Ozk more attractive for value investors.

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

You can read more about Bank Ozk’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.

West Coast Community Bancorp’s Value Grade

Value Grade:

West Coast Community Bancorp is the Holding Company for Santa Cruz County Bank (the Bank), its wholly owned subsidiary. The Bank is an SBA lender in Santa Cruz County and Silicon Valley and a USDA lender in the state of California. As a full-service bank, Santa Cruz County Bank offers competitive deposit and lending solutions for businesses and individuals, including business loans, lines of credit, commercial real estate financing, construction lending, agricultural loans, SBA and USDA government guaranteed loans, asset-based lending, credit cards, merchant services, remote deposit capture, mobile and online banking, bill payment and treasury management. Its personal banking products include checking accounts, savings and certificates of deposits (CDs), individual retirement accounts (IRAs), health savings accounts and additional services. The Bank has branches in Aptos, Capitola, Cupertino, Monterey, Salinas, Santa Cruz, Scotts Valley, and Watsonville.

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.

West Coast Community Bancorp has a Value Score of 71, which is considered to be undervalued.

West Coast Community Bancorp’s price-earnings ratio is 8.0 compared to the industry median at 10.1. This means that it has a lower price relative to its earnings compared to its peers. This makes West Coast Community Bancorp more attractive for value investors.

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

You can read more about West Coast Community 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.

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 5 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.

• Eagle Bancorp Montana Inc stock has a Value Grade of A.
• High Country Bancorp, Inc. stock has a Value Grade of A.
• Hometrust Bancshares Inc stock has a Value Grade of B.
• Bank Ozk stock has a Value Grade of A.
• West Coast Community Bancorp stock has a Value Grade of B.

Now that you have a bit more background about each of the 5 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.

• 5 Undervalued Banks Stocks for Wednesday, May 29
• 4 Undervalued Banks Stocks for Tuesday, May 28
• What You Need to Know About Bank of Nova Scotia's Q2 Earnings
• Why Burke & Herbert Bank & Trust Co’s (BHRB) Stock Is Up 9.53%

AAII Disclaimer

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