Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 4 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.

Click the button below to learn more about A+ Investor and subscribe today.

4 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 4 undervalued stocks in the Banks industry for Friday, July 05, 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.

Axos Financial Inc’s Value Grade

Value Grade:

Axos Financial Inc. is a financial holding company that operates through its subsidiary, Axos Bank (the Bank). The Bank provides consumer and commercial banking products through its digital online and mobile banking platforms, distribution channels and affinity partners. The Company’s segments include Banking Business and Securities Business. Banking Business segment has a range of banking services, including online banking, concierge banking, and mortgage, vehicle, and unsecured lending through online and telephonic distribution channels. In addition, it focuses on providing deposit products nationwide to industry verticals, cash management products to a variety of businesses, and commercial & industrial and commercial real estate lending to clients. Securities Business segment includes the clearing broker-dealer, registered investment advisor custody business, registered investment advisor, and introducing broker-dealer lines of businesses.

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.

Axos Financial Inc has a Value Score of 85, which is considered to be undervalued.

When you look at Axos Financial Inc’s price-to-sales ratio at 2.09 compared to the industry median at 1.85, this company has a higher price relative to revenue compared to its peers. This could make Axos Financial Inc’s stock less attractive for value investors.

Axos Financial Inc’s price-earnings ratio is 7.71 compared to the industry median at 10.24. This means it has a lower share price relative to earnings compared to its peers. This could make Axos Financial Inc more attractive for value investors.

Now, let’s assess Axos Financial Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 1.6, 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. Axos Financial Inc’s shareholder yield is higher than its industry median ratio of 3.50%. 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. Axos Financial Inc’s price-to-book ratio is higher than its industry median ratio of 0.89. This could make Axos Financial Inc less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Axos 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. Axos Financial Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 11.64. This could make Axos Financial Inc more attractive because the lower P/FCF ratio indicates that Axos 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.

Bayfirst Financial Corp’s Value Grade

Value Grade:

BayFirst Financial Corp. is a bank holding company that operates through its wholly owned subsidiary, BayFirst National Bank (the Bank). The Bank operates about 12 full-service banking offices throughout the Tampa Bay region and offers a range of commercial and consumer banking services to businesses and individuals. The Bank offers its products and services through its Community Banking Division and its separately branded loan origination platform, CreditBench. CreditBench is a government guaranteed lender with specific expertise in originating small business administration (SBA) 7(a) loans and United States Department of Agriculture (USDA) loans throughout the nation. The Bank offers specialized business and personal checking accounts, Internet banking and online bill payment, remote capture and deposit, cash management, and others. The Bank also offers customary community bank deposit products, including interest-bearing and noninterest-bearing checking accounts, 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.

Bayfirst Financial Corp has a Value Score of 96, which is considered to be undervalued.

Bayfirst Financial Corp’s price-earnings ratio is 11.2 compared to the industry median at 10.2. This means that it has a higher price relative to its earnings compared to its peers. This makes Bayfirst Financial Corp less attractive for value investors.

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

You can read more about Bayfirst 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.

1895 Bancorp of Wisconsin Inc’s Value Grade

Value Grade:

1895 Bancorp of Wisconsin, Inc. is the savings and loan holding company for PyraMax Bank, FSB (PyraMax Bank). PyraMax Bank is a stock savings bank, which operates as a full-service financial institution, providing a full range of financial services, including the granting of commercial, residential, and consumer loans and acceptance of deposits from individual customers and small businesses in the metropolitan Milwaukee, Wisconsin, area. Its business consists primarily of taking deposits from the general public and investing those deposits, together with funds generated from operations, in one- to four-family residential real estate loans, commercial real estate loans (which includes non-owner occupied commercial real estate, multi-family, owner occupied commercial real estate and one- to four-family non-owner-occupied loans), commercial loans and consumer loans. It offers variety of deposit accounts, including checking accounts, savings accounts, and certificate of deposit accounts.

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.

1895 Bancorp of Wisconsin Inc has a Value Score of 73, which is considered to be undervalued.

1895 Bancorp of Wisconsin Inc’s price-to-book ratio is higher than its peers. This could make 1895 Bancorp of Wisconsin Inc less attractive for value investors when compared to the industry median at 0.89.

You can read more about 1895 Bancorp of Wisconsin 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.

Central Pacific Financial Corp.’s Value Grade

Value Grade:

Central Pacific Financial Corp. is the bank holding company of Central Pacific Bank (the Bank). The Bank is engaged in offering traditional deposit and lending products and services to consumer and business customers, such as accepting demand, money market, savings and time deposits, originating loans, including commercial loans, construction loans, commercial real estate loans, residential mortgage loans, and consumer loans and fiduciary and investment management services. Its investment securities portfolio includes mortgage-backed securities (MBS), other debt securities and equity securities. Its MBS portfolio comprises residential MBS issued by United States government entities and agencies. It offers wealth management products and services, such as non-deposit investment products, annuities, investment management, asset custody and general consultation and planning services. The Bank has over 27 bank branches and 58 ATMs located throughout the State of Hawaii.

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.

Central Pacific Financial Corp. has a Value Score of 83, which is considered to be undervalued.

Central Pacific Financial Corp.’s price-earnings ratio is 10.3 compared to the industry median at 10.2. This means that it has a higher price relative to its earnings compared to its peers. This makes Central Pacific Financial Corp. less attractive for value investors.

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

You can read more about Central Pacific 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.

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 4 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.

• Axos Financial Inc stock has a Value Grade of A.
• Bayfirst Financial Corp stock has a Value Grade of A.
• 1895 Bancorp of Wisconsin Inc stock has a Value Grade of B.
• Central Pacific Financial Corp. stock has a Value Grade of A.

Now that you have a bit more background about each of the 4 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.

• 4 Undervalued Banks Stocks for Friday, July 05
• 4 Undervalued Banks Stocks for Thursday, July 04
• 4 Undervalued Banks Stocks for Wednesday, July 03
• Why Dime Community Bancshares Inc’s (DCOM) Stock Is Down 4.45%

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.