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 Friday, June 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.

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 91, which is considered to be undervalued.

When you look at Dime Community Bancshares Inc’s price-to-sales ratio at 1.22 compared to the industry median at 1.82, this company has a lower price relative to revenue compared to its peers. This could make Dime Community Bancshares Inc’s stock more attractive for value investors.

Dime Community Bancshares Inc’s price-earnings ratio is 11.24 compared to the industry median at 10.10. This means it has a higher share price relative to earnings compared to its peers. This could make Dime Community Bancshares Inc less attractive for value investors.

Now, let’s assess Dime Community Bancshares Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 3.5, 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. Dime Community Bancshares 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. Dime Community Bancshares Inc’s price-to-book ratio is lower than its industry median ratio of 0.89. This could make Dime Community Bancshares Inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Dime Community Bancshares Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Dime Community Bancshares Inc’s price-to-free-cash-flow ratio is higher than its industry median ratio of 11.35. This could make Dime Community Bancshares Inc less attractive because the higher P/FCF ratio indicates that Dime Community Bancshares 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.

Embassy Bancorp Inc’s Value Grade

Value Grade:

Embassy Bancorp, Inc. is a bank holding company. The Company's operating subsidiary is Embassy Bank for The Lehigh Valley (the Bank). The Company acts as an independent community financial services provider and offers banking and related financial services to individual, business, and government customers. The Company offers an array of commercial and retail financial services, including the taking of time, savings, and demand deposits; the making of commercial, consumer, residential mortgage, and home equity loans; and the providing of other financial services. The Company offers its retail customer base a product line of consumer loan services, including mortgage loans, first time home buyer mortgages, secured home equity loans, lines of credit, auto loans, and, to a much lesser extent, unsecured personal loans. It offers a range of specialty home equity and mortgage products. Its other services include mobile banking, commercial credit cards, safe deposit boxes, among others.

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.

Embassy Bancorp Inc has a Value Score of 87, which is considered to be undervalued.

Embassy Bancorp Inc’s price-earnings ratio is 8.9 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 Embassy Bancorp Inc more attractive for value investors.

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

You can read more about Embassy 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.

First Guaranty Bancshares Inc’s Value Grade

Value Grade:

First Guaranty Bancshares, Inc. is the holding company for First Guaranty Bank (the Bank). The Bank offers a range of financial services and focuses on building client relationships and providing customer service. The Bank operates about 36 locations throughout Louisiana, Texas, Kentucky, and West Virginia. The Banks principal business consists of attracting deposits from the general public and local municipalities in its market areas and then investing those deposits. The Bank also generates funds from operations, borrowings in lending and investing in securities. The Bank serves the credit needs of its customer base, including commercial real estate loans, commercial and industrial loans, commercial leases, and others. The Bank offers a variety of deposit accounts to consumers, small businesses, and municipalities, including personal and business checking and savings accounts, time deposits and money market accounts. In addition, the Bank offers a range of consumer 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.

First Guaranty Bancshares Inc has a Value Score of 64, which is considered to be undervalued.

First Guaranty Bancshares Inc’s price-earnings ratio is 18.3 compared to the industry median at 10.1. This means that it has a higher price relative to its earnings compared to its peers. This makes First Guaranty Bancshares Inc less attractive for value investors.

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

You can read more about First Guaranty 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.

Franklin Financial Services Corp’s Value Grade

Value Grade:

Franklin Financial Services Corporation is a bank holding company. The Company conducts substantially all of its business through its wholly owned direct banking subsidiary, Farmers and Merchants Trust Company of Chambersburg (the Bank). The Bank acts as an independent community financial services provider and offers traditional banking and related financial services to individual, business and government customers. Through its community offices and electronic banking applications, the Bank offers a range of commercial and retail financial services, including the taking of time, savings and demand deposits; the making of commercial, consumer and mortgage loans, and the providing of safe deposit services. The Bank also performs personal, corporate, pension and fiduciary services through its Wealth Management Department. The Bank has approximately 22 community banking locations in Franklin, Cumberland, Fulton and Huntingdon Counties PA, and Washington County MD.

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.

Franklin Financial Services Corp has a Value Score of 92, which is considered to be undervalued.

Franklin Financial Services Corp’s price-earnings ratio is 9.1 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 Franklin Financial Services Corp more attractive for value investors.

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

You can read more about Franklin 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.

Harleysville Financial Corp’s Value Grade

Value Grade:

Harleysville Financial Corporation is the bank holding company for Harleysville Bank (the Bank). The Bank is principally in the business of attracting deposits through its branch offices and investing those deposits, together with funds from borrowings and operations. The Company provides personal banking business banking services. Its personal banking services include money market plus, trusty's club (Youth Savings), individual retirement account (IRA), certificates of deposit, auto loans, mortgage loans, home-equity loans, savings account loan, cash rewards, cash back rewards, saver and statement savings. The Company’s business banking services business checking, business savings, cash management services. Its business checking provides business analyzed checking, business interest checking and community non-profit checking. The Company’s business savings include business savings accounts, business loans & credit, business term loan, line of credit and commercial real estate loan.

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.

Harleysville Financial Corp has a Value Score of 88, which is considered to be undervalued.

Harleysville Financial Corp’s price-earnings ratio is 6.8 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 Harleysville Financial Corp more attractive for value investors.

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

You can read more about Harleysville Financial 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.

Potomac Bancshares Inc’s Value Grade

Value Grade:

Potomac Bancshares, Inc. is the one bank holding company of Bank of Charles Town (BCT), also known as The Community's Bank. BCT is a locally owned community bank with nine full-service offices and one loan production office serving the Eastern Panhandle of West Virginia, Washington County, Maryland and Loudoun County, Virginia. Its personal banking services include personal checking; savings, Certificates of Deposit (CD) and Individual Retirement Accounts (IRA); Centsables financial education; online and mobile banking; Convenience services; home equity lending; personal loans; consumer credit cards; account opening service, and others. The Company’s business banking services include specialties, commercial loans, small business administration (SBA) lending, business checking solutions, management, Autobooks, online and mobile banking, business credit cards and others. It offers fixed and adjustable-rate mortgages, construction loans, and VA, FHA, and USDA options.

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.

Potomac Bancshares Inc has a Value Score of 80, which is considered to be undervalued.

Potomac Bancshares Inc’s price-earnings ratio is 8.6 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 Potomac Bancshares Inc more attractive for value investors.

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

You can read more about Potomac 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.

Tri City Bankshares Corp’s Value Grade

Value Grade:

Tri City Bankshares Corporation is a bank holding company, which offers a range of financial products and services to external customers, including accepting deposits and originating residential, consumer and commercial loans. It operates through the community banking segment. Its wholly owned subsidiary is Tri City National Bank (the Bank). The Bank's personal banking services include checking accounts, savings and certificate of deposits, health savings accounts, individual retirement accounts, credit cards, and investments. The Bank's business banking services include business loans, business checking, business savings and certificate of deposits, health savings account (HSA) for employers, business credit cards, business services, business fraud prevention, and municipal banking. The Bank's mortgages and loans include mortgages, auto loans, personal loans, and business loans. The Bank's additional services include safe deposit boxes, gift cards, and others.

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.

Tri City Bankshares Corp has a Value Score of 95, which is considered to be undervalued.

Tri City Bankshares Corp’s price-earnings ratio is 7.3 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 Tri City Bankshares Corp more attractive for value investors.

Tri City Bankshares Corp’s price-to-book ratio is higher than its peers. This could make Tri City Bankshares Corp less attractive for value investors when compared to the industry median at 0.89.

You can read more about Tri City Bankshares 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 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.

• Dime Community Bancshares Inc stock has a Value Grade of A.
• Embassy Bancorp Inc stock has a Value Grade of A.
• First Guaranty Bancshares Inc stock has a Value Grade of B.
• Franklin Financial Services Corp stock has a Value Grade of A.
• Harleysville Financial Corp stock has a Value Grade of A.
• Potomac Bancshares Inc stock has a Value Grade of B.
• Tri City Bankshares Corp stock has a Value Grade of A.

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 Friday, June 28
• 6 Undervalued Banks Stocks for Thursday, June 27
• Why ACNB Corp’s (ACNB) Stock Is Up 4.54%
• Why Banco Bbva Argentina SA (ADR)’s (BBAR) Stock Is Up 4.28%

AAII Disclaimer

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