Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 6 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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6 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 6 undervalued stocks in the Banks industry for Tuesday, July 02, 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.

Bankwell Financial Group Inc’s Value Grade

Value Grade:

Bankwell Financial Group, Inc. is a bank holding company. The Company offers a range of financial services through its banking subsidiary, Bankwell Bank (the Bank). The Bank is a Connecticut state chartered commercial bank. The Bank's commercial lending products include owner-occupied commercial real estate loans, commercial real estate investment loans, commercial loans (such as business term loans, equipment financing and lines of credit) to small and medium-sized businesses and real estate construction and development loans. Its depository products include checking, savings, money market and certificates of deposit at a variety of rates. The Bank operates nine branches in New Canaan, Stamford, Fairfield, Westport, Darien, Norwalk, and Hamden, Connecticut. The Bank provides a range of services to clients in its market, an area encompassing approximately a 100-mile radius around its branch network.

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.

Bankwell Financial Group Inc has a Value Score of 96, which is considered to be undervalued.

When you look at Bankwell Financial Group Inc’s price-to-sales ratio at 1.02 compared to the industry median at 1.87, this company has a lower price relative to revenue compared to its peers. This could make Bankwell Financial Group Inc’s stock more attractive for value investors.

Bankwell Financial Group Inc’s price-earnings ratio is 6.66 compared to the industry median at 10.30. This means it has a lower share price relative to earnings compared to its peers. This could make Bankwell Financial Group Inc more attractive for value investors.

Now, let’s assess Bankwell Financial Group Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 0.5, 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. Bankwell Financial Group Inc’s shareholder yield is lower than its industry median ratio of 3.46%. 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. Bankwell Financial Group Inc’s price-to-book ratio is lower than its industry median ratio of 0.90. This could make Bankwell Financial Group Inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Bankwell Financial Group Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Bankwell Financial Group Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 11.69. This could make Bankwell Financial Group Inc more attractive because the lower P/FCF ratio indicates that Bankwell Financial Group 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.

Mission Valley Bancorp’s Value Grade

Value Grade:

Mission Valley Bancorp is a bank holding company, which operates through its two wholly owned subsidiaries, Mission Valley Bank (the Bank) and Mission SBA Loan Servicing LLC (Mission SBA). The Bank is a full-service, independent, commercial bank specializing in the banking needs of small to medium businesses with full-service branches in the San Fernando and Santa Clarita Valleys. Mission SBA is a de novo SBA lender service provider (LSP), which provides SBA lending services, such as underwriting, processing, closing, servicing, and referral/placement services, to other financial institutions.

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.

Mission Valley Bancorp has a Value Score of 86, which is considered to be undervalued.

Mission Valley Bancorp’s price-earnings ratio is 6.1 compared to the industry median at 10.3. This means that it has a lower price relative to its earnings compared to its peers. This makes Mission Valley Bancorp more attractive for value investors.

Mission Valley Bancorp’s price-to-book ratio is higher than its peers. This could make Mission Valley Bancorp less attractive for value investors when compared to the industry median at 0.90.

You can read more about Mission Valley 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.

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 61, which is considered to be undervalued.

Northeast Bank’s price-earnings ratio is 8.4 compared to the industry median at 10.3. 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 0.90.

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.

Pinnacle Bancshares, Inc.’s Value Grade

Value Grade:

Pinnacle Bancshares, Inc. is a bank holding company whose principal activity is the ownership and management of its wholly owned subsidiary, Pinnacle Bank. The Bank is primarily in the business of obtaining funds in the form of various savings, demand deposit, and time deposit products and investing those funds in mortgage, consumer, and commercial loans. The Bank operates in seven offices in the central and northwest portions of Alabama and originates its loans in this market area. The Company offers various types of real estate loan products, including commercial real estate mortgage loans, loans for real estate construction and development, residential mortgage loans and other real estate mortgage loans. Its commercial non-real estate loan portfolio segment includes commercial, financial, agricultural and municipal tax-free loans. The Company’s consumer loan portfolio segment includes direct consumer installment loans, overdrafts, and other revolving credit 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.

Pinnacle Bancshares, Inc. has a Value Score of 88, which is considered to be undervalued.

Pinnacle Bancshares, Inc.’s price-earnings ratio is 5.8 compared to the industry median at 10.3. This means that it has a lower price relative to its earnings compared to its peers. This makes Pinnacle Bancshares, Inc. more attractive for value investors.

Pinnacle Bancshares, Inc.’s price-to-book ratio is lower than its peers. This could make Pinnacle Bancshares, Inc. more attractive for value investors when compared to the industry median at 0.90.

You can read more about Pinnacle 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.

Trustmark Corp’s Value Grade

Value Grade:

Trustmark Corporation is a bank holding company. The Company's principal subsidiary is Trustmark National Bank (TNB). Through TNB and its subsidiaries, the Company operates as a financial services company providing banking and other financial solutions. The Company operates through three segments: General Banking, Wealth Management and Insurance. The General Banking Segment is responsible for all traditional banking products and services, including loans and deposits. The Wealth Management Segment provides customized solutions for customers by integrating financial services with traditional banking products and services, such as money management, full-service brokerage, financial planning, personal and institutional trust and retirement services. Through Fisher Brown Bottrell Insurance, Inc. (FBBI), a subsidiary of TNB, the Insurance Segment provides a range of retail insurance products, including commercial risk management products, bonding, group benefits and personal lines coverage.

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.

Trustmark Corp has a Value Score of 66, which is considered to be undervalued.

Trustmark Corp’s price-earnings ratio is 11.6 compared to the industry median at 10.3. This means that it has a higher price relative to its earnings compared to its peers. This makes Trustmark Corp less attractive for value investors.

Trustmark Corp’s price-to-book ratio is lower than its peers. This could make Trustmark Corp more attractive for value investors when compared to the industry median at 0.90.

You can read more about Trustmark 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.

United Overseas Bank Ltd (ADR)’s Value Grade

Value Grade:

United Overseas Bank Limited (UOB) is a Singapore-based bank, which operates through three segments: Group Retail (GR), Group Wholesale Banking (GWB) and Global Markets (GM). The GR segment covers individual customers, offering them a range of products and services, including deposits, insurance, card, wealth management, investment and loan products which are available across its global branch network. The GWB segment consists of corporate and institutional client segments. GWB provides customers with a broad range of products and services, including loans, trade services, cash management, capital markets solutions, advisory and treasury products. The GM segment provides a suite of treasury products and services across multi-asset classes which includes foreign exchange, interest rate, credit, commodities, equities and structured investment products. Its consumer banking business comprises of unsecured and secured lending portfolios, wealth management, and retail deposit business.

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.

United Overseas Bank Ltd (ADR) has a Value Score of 82, which is considered to be undervalued.

United Overseas Bank Ltd (ADR)’s price-earnings ratio is 9.4 compared to the industry median at 10.3. This means that it has a lower price relative to its earnings compared to its peers. This makes United Overseas Bank Ltd (ADR) more attractive for value investors.

United Overseas Bank Ltd (ADR)’s price-to-book ratio is lower than its peers. This could make United Overseas Bank Ltd (ADR) more attractive for value investors when compared to the industry median at 0.90.

You can read more about United Overseas Bank Ltd (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.

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 6 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.

• Bankwell Financial Group Inc stock has a Value Grade of A.
• Mission Valley Bancorp stock has a Value Grade of A.
• Northeast Bank stock has a Value Grade of B.
• Pinnacle Bancshares, Inc. stock has a Value Grade of A.
• Trustmark Corp stock has a Value Grade of B.
• United Overseas Bank Ltd (ADR) stock has a Value Grade of A.

Now that you have a bit more background about each of the 6 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.

• 6 Undervalued Banks Stocks for Tuesday, July 02
• 5 Undervalued Banks Stocks for Monday, July 01
• Why Banco Bbva Argentina SA (ADR)’s (BBAR) Stock Is Down 6.49%
• Why Banco Macro SA (ADR)’s (BMA) Stock Is Down 7.57%

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.