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 Tuesday, June 18, 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.

HBT Financial Inc’s Value Grade

Value Grade:

HBT Financial, Inc. is a bank holding company for Heartland Bank and Trust Company (the Bank). The Bank provides a comprehensive suite of financial products and services to consumers, businesses, and municipal entities throughout Illinois and Eastern Iowa. Its products and services are primarily deposit, lending, and ancillary products that offer a broad range of options to meet the financial needs of consumers, businesses, and municipal entities. It also provides traditional trust and investment services, farmland management, and farmland sales through its wealth management division. It offers a broad range of lending products with a focus on regulatory commercial real estate (CRE), which includes non-owner-occupied CRE, construction and land development (C&D;) and multifamily; commercial and industrial (C&I;) and owner-occupied CRE; agricultural and farmland; and one-to-four family residential loans. It also provides municipal, consumer and other 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.

HBT Financial Inc has a Value Score of 72, which is considered to be undervalued.

When you look at HBT Financial Inc’s price-to-sales ratio at 2.52 compared to the industry median at 1.81, this company has a higher price relative to revenue compared to its peers. This could make HBT Financial Inc’s stock less attractive for value investors.

HBT Financial Inc’s price-earnings ratio is 8.48 compared to the industry median at 9.90. This means it has a lower share price relative to earnings compared to its peers. This could make HBT Financial Inc more attractive for value investors.

Now, let’s assess HBT Financial Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 6.2, 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. HBT Financial Inc’s shareholder yield is lower than its industry median ratio of 3.60%. 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. HBT Financial Inc’s price-to-book ratio is higher than its industry median ratio of 0.87. This could make HBT Financial Inc less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at HBT Financial Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. HBT Financial Inc’s price-to-free-cash-flow ratio is higher than its industry median ratio of 11.14. This could make HBT Financial Inc less attractive because the higher P/FCF ratio indicates that HBT Financial 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.

Lloyds Banking Group PLC (ADR)’s Value Grade

Value Grade:

Lloyds Banking Group plc is a United Kingdom-based financial services company. The Company provides a range of banking and financial services that is focused primarily on retail and commercial customers. It operates through three segments: Retail, Commercial Banking, and Insurance, Pensions and Investments. The Retail segment offers a range of financial services products to personal customers, including current accounts, savings, mortgages, credit cards, unsecured loans, motor finance and leasing solutions. The Commercial Banking segment serves small and medium businesses, as well as corporate and institutional clients, providing lending, transactional banking, working capital management, debt financing and risk management services. The Insurance, Pensions and Investments segment offers insurance, investment and pension management products and services. This segment helps customers with their long-term protection, retirement and investment needs.

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.

Lloyds Banking Group PLC (ADR) has a Value Score of 97, which is considered to be undervalued.

Lloyds Banking Group PLC (ADR)’s price-earnings ratio is 7.2 compared to the industry median at 9.9. This means that it has a lower price relative to its earnings compared to its peers. This makes Lloyds Banking Group PLC (ADR) more attractive for value investors.

Lloyds Banking Group PLC (ADR)’s price-to-book ratio is higher than its peers. This could make Lloyds Banking Group PLC (ADR) less attractive for value investors when compared to the industry median at 0.87.

You can read more about Lloyds Banking Group PLC (ADR)’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.

Washington Trust Bancorp Inc’s Value Grade

Value Grade:

Washington Trust Bancorp, Inc. is a holding company of The Washington Trust Company (the Bank). The Bank is a state-chartered bank and financial services company. The Company operates through two segments: Commercial Banking and Wealth Management Services. The Commercial Banking segment includes commercial, residential and consumer lending activities; mortgage banking activities; deposit generation; cash management activities; banking activities, including customer support and the operation of automated teller machines (ATMs), telephone banking, internet banking and mobile banking services; as well as investment portfolio and wholesale funding activities. The Wealth Management Services segment includes investment management; holistic financial planning services; personal trust and estate services, including services as trustee, personal representative and custodian; settlement of decedents’ estates; and institutional trust services, including custody and fiduciary 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.

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

Washington Trust Bancorp Inc’s price-earnings ratio is 9.5 compared to the industry median at 9.9. This means that it has a lower price relative to its earnings compared to its peers. This makes Washington Trust Bancorp Inc more attractive for value investors.

Washington Trust Bancorp Inc’s price-to-book ratio is lower than its peers. This could make Washington Trust Bancorp Inc fairly attractive for value investors when compared to the industry median at 0.87.

You can read more about Washington Trust 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.

Westbury Bancorp Inc’s Value Grade

Value Grade:

Westbury Bancorp, Inc. is the holding company for Westbury Bank (the Bank). The Bank is an independent community bank serving communities in Washington and Waukesha Counties through its eight banking offices providing deposit and loan services to individuals, professionals, and businesses throughout its markets. The Bank provides checking, savings, certificates of deposit, consumer loans, credit cards, individual retirement accounts, and others. The Bank’s services include online banking, mobile banking, bill pay, Pop Money, order checks, and e-statements, among others. The Bank’s business services include business checking and treasury management. The Bank’s commercial loans category includes commercial real estate, lines of credit, equipment, construction, working capital, acquisitions, letters of credit, and SBAs. The Bank offers an array of home loan options, including purchase, refinance, construction, Federal VA, WHEDA, and home equity loans and lines of credit.

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.

Westbury Bancorp Inc has a Value Score of 91, which is considered to be undervalued.

Westbury Bancorp Inc’s price-earnings ratio is 6.2 compared to the industry median at 9.9. This means that it has a lower price relative to its earnings compared to its peers. This makes Westbury Bancorp Inc more attractive for value investors.

Westbury Bancorp Inc’s price-to-book ratio is lower than its peers. This could make Westbury Bancorp Inc fairly attractive for value investors when compared to the industry median at 0.87.

You can read more about Westbury 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.

Webster Financial Corporation’s Value Grade

Value Grade:

Webster Financial Corporation is the holding company for Webster Bank, N.A. and its HSA Bank division. The Company's segments include Commercial Banking, HSA Bank, and Consumer Banking. The Commercial Banking segment serves businesses with more than two million dollars of revenue through its commercial real estate and equipment finance, business banking, asset-based lending and commercial services, private banking, treasury management and other business units. The HSA Bank segment offers a comprehensive consumer-directed employee benefit and healthcare solution that includes health savings accounts, health reimbursement arrangements, flexible spending accounts, and commuter benefits. The Consumer Banking segment operates a distribution network, throughout southern New England and the New York metro and suburban markets, that comprises approximately 198 banking centers and 349 automated teller machines, a customer care center and a full range of Web and mobile-based banking 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.

Webster Financial Corporation has a Value Score of 89, which is considered to be undervalued.

Webster Financial Corporation’s price-earnings ratio is 8.3 compared to the industry median at 9.9. This means that it has a lower price relative to its earnings compared to its peers. This makes Webster Financial Corporation more attractive for value investors.

Webster Financial Corporation’s price-to-book ratio is higher than its peers. This could make Webster Financial Corporation less attractive for value investors when compared to the industry median at 0.87.

You can read more about Webster 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 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.

• HBT Financial Inc stock has a Value Grade of B.
• Lloyds Banking Group PLC (ADR) stock has a Value Grade of A.
• Washington Trust Bancorp Inc stock has a Value Grade of A.
• Westbury Bancorp Inc stock has a Value Grade of A.
• Webster Financial Corporation stock has a Value Grade of A.

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 Tuesday, June 18
• 7 Undervalued Banks Stocks for Monday, June 17
• Why Grupo Supervielle SA -ADR’s (SUPV) Stock Is Down 4.46%
• Why Northfield Bancorp Inc’s (NFBK) Stock Is Up 4.62%

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.