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 Monday, June 24, 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.

Credicorp Ltd. (USA)’s Value Grade

Value Grade:

Credicorp Ltd is a Peru-based financial services holding company. The Company is organized into four lines of business: Universal Banking, Insurance and Pensions that mainly serve the overall Peruvian market, Microfinance and Investment Banking and Wealth Management that have a strong presence in Latin America. The Company has leveraged its franchises and has consolidated into a Group with more than 36,000 employees and operations mainly in six countries: Peru, Bolivia, Colombia, Chile, Panama and the United States.

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.

Credicorp Ltd. (USA) has a Value Score of 72, which is considered to be undervalued.

When you look at Credicorp Ltd. (USA)’s price-to-sales ratio at 2.48 compared to the industry median at 1.79, this company has a higher price relative to revenue compared to its peers. This could make Credicorp Ltd. (USA)’s stock less attractive for value investors.

Credicorp Ltd. (USA)’s price-earnings ratio is 9.57 compared to the industry median at 9.88. This means it has a lower share price relative to earnings compared to its peers. This could make Credicorp Ltd. (USA) more attractive for value investors.

Now, let’s assess Credicorp Ltd. (USA)’s EV/EBITDA ratio, also known as enterprise multiple. At 4.1, when compared to the industry median of 6.3, 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. Credicorp Ltd. (USA)’s shareholder yield is higher than its industry median ratio of 3.62%. 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. Credicorp Ltd. (USA)’s price-to-book ratio is higher than its industry median ratio of 0.87. This could make Credicorp Ltd. (USA) less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Credicorp Ltd. (USA)’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Credicorp Ltd. (USA)’s price-to-free-cash-flow ratio is higher than its industry median ratio of 11.10. This could make Credicorp Ltd. (USA) less attractive because the higher P/FCF ratio indicates that Credicorp Ltd. (USA) 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.

Banco Macro SA (ADR)’s Value Grade

Value Grade:

Banco Macro SA is an Argentina-based public company that offers traditional banking products and services to companies, including those operating in regional economies, and individuals, thus strengthening its goal to operate as a multiservice bank. Through other companies in the group, the Company also renders services as trustee agent and director and manager of mutual funds, as well as stock exchange services. The Company began the process of acquiring entities, assets and liabilities as part of the privatization of provincial banks and other banking institutions. The Company and Worldline Argentina SA entered into a joint venture agreement with Siemens Itron Business Servicies SA, to be jointly controlled by both companies, for the purpose of facilitating the development of a tax management data processing center, modernizing the existing tax collection systems and processes used by the Province of Salta, and managing and recovering municipal taxes and fees.

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.

Banco Macro SA (ADR) has a Value Score of 87, which is considered to be undervalued.

Banco Macro SA (ADR)’s price-earnings ratio is 5.7 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 Banco Macro SA (ADR) more attractive for value investors.

Banco Macro SA (ADR)’s price-to-book ratio is lower than its peers. This could make Banco Macro SA (ADR) more attractive for value investors when compared to the industry median at 0.87.

You can read more about Banco Macro SA (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.

Home Bancorp, Inc.’s Value Grade

Value Grade:

Home Bancorp, Inc. is the holding company for Home Bank, N.A. (the Bank). The Bank is a wholly owned subsidiary of the Company, conducts business through approximately 42 banking offices in the Acadiana, Baton Rouge, Greater New Orleans and Northshore (of Lake Pontchartrain) regions of south Louisiana, the Natchez region of west Mississippi and the Houston region of Texas. The Bank is primarily engaged in attracting deposits from the general public and using those funds to invest in loans and securities. The Bank’s principal sources of funds are customer deposits, repayments of loans, repayments of investments and funds borrowed from outside sources such as the Federal Home Loan Bank (FHLB) of Dallas. These funds are primarily used for the origination of loans, including one-to four-family first mortgage loans, home equity loans and lines, commercial real estate loans, construction and land loans, multifamily residential loans, commercial and industrial loans, and consumer 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.

Home Bancorp, Inc. has a Value Score of 89, which is considered to be undervalued.

Home Bancorp, Inc.’s price-earnings ratio is 7.9 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 Home Bancorp, Inc. more attractive for value investors.

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

You can read more about Home 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.

Independent Bank Corp (Michigan)’s Value Grade

Value Grade:

Independent Bank Corporation is a bank holding company for Independent Bank (the Bank). The Bank provides a full range of financial services, including commercial banking, mortgage lending, investments, and insurance. It offers a broad range of banking services to individuals and businesses, including checking and savings accounts, commercial lending, direct and indirect consumer financing, mortgage lending, and safe deposit box services. Its principal markets are the rural and suburban communities across Lower Michigan, which are served by the bank's main office in Grand Rapids, Michigan, and a total of 56 branches, two drive-thru facilities, and five Michigan-based loan production offices. It also has one loan production facility in Ohio (Fairlawn). The bank's branches provide full-service lobby and drive-thru services, as well as automatic teller machines (ATMs). In addition, it also provides Internet and mobile banking capabilities to its customers.

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.

Independent Bank Corp (Michigan) has a Value Score of 84, which is considered to be undervalued.

Independent Bank Corp (Michigan)’s price-earnings ratio is 8.1 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 Independent Bank Corp (Michigan) more attractive for value investors.

Independent Bank Corp (Michigan)’s price-to-book ratio is lower than its peers. This could make Independent Bank Corp (Michigan) more attractive for value investors when compared to the industry median at 0.87.

You can read more about Independent Bank Corp (Michigan)’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 Bancorporation Inc’s Value Grade

Value Grade:

West Bancorporation, Inc., is a financial holding company. The Company owns West Bank (the Bank), which is a business-focused community bank. The Bank provides full-service community banking and trust services to customers. The Bank offers range of credit to its customers, including commercial, real estate, and consumer loans. It also offers trust services, including the administration of estates, conservatorships, personal trusts, and agency accounts. The Company operates in the markets, including central Iowa, which is generally the greater Des Moines metropolitan area; eastern Iowa, which includes the area surrounding Iowa City and Coralville, and southern Minnesota, which includes the cities of Rochester, Owatonna, Mankato, and St. Cloud. The Bank offers a full range of deposit services, including checking, savings and money market accounts and time certificates of deposit. It also offers online banking, mobile banking, and treasury 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.

West Bancorporation Inc has a Value Score of 72, which is considered to be undervalued.

West Bancorporation Inc’s price-earnings ratio is 12.7 compared to the industry median at 9.9. This means that it has a higher price relative to its earnings compared to its peers. This makes West Bancorporation Inc less attractive for value investors.

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

You can read more about West Bancorporation 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 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.

• Credicorp Ltd. (USA) stock has a Value Grade of B.
• Banco Macro SA (ADR) stock has a Value Grade of A.
• Home Bancorp, Inc. stock has a Value Grade of A.
• Independent Bank Corp (Michigan) stock has a Value Grade of A.
• West Bancorporation Inc 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 Monday, June 24
• 5 Undervalued Banks Stocks for Friday, June 21
• Why Republic Bancorp Inc’s (RBCAA) Stock Is Down 5.05%
• 6 Undervalued Banks Stocks for Thursday, June 20

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.