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 Tuesday, July 09, 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.

Camden National Corporation’s Value Grade

Value Grade:

Camden National Corporation is a bank holding company for Camden National Bank (the Bank). The Bank provides a broad array of banking and other financial services to consumer, institutional, municipal, non-profit, and commercial customers. The Bank optimizes its in-person professional financial guidance with technology, delivered through sophisticated digital channels. These digital products empower customers to bank anywhere at any time, including, but not limited to, online and mobile banking, which includes MortgageTouch, its easy-to-use online platform for consumer borrowers; BusinessTouch, its online loan application system with instant approval, making borrowing faster and easier for small businesses, and TreasuryLink, its secure online platform designed to offer advanced cash management, monitoring capabilities and controls for commercial customers. The Bank offers comprehensive wealth management and trust services, including investment advisory 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.

Camden National Corporation has a Value Score of 83, which is considered to be undervalued.

When you look at Camden National Corporation’s price-to-sales ratio at 2.01 compared to the industry median at 1.84, this company has a higher price relative to revenue compared to its peers. This could make Camden National Corporation’s stock less attractive for value investors.

Camden National Corporation’s price-earnings ratio is 10.71 compared to the industry median at 10.14. This means it has a higher share price relative to earnings compared to its peers. This could make Camden National Corporation less attractive for value investors.

Now, let’s assess Camden National Corporation’s EV/EBITDA ratio, also known as enterprise multiple. At 6.1, 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. Camden National Corporation’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. Camden National Corporation’s price-to-book ratio is higher than its industry median ratio of 0.88. This could make Camden National Corporation less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Camden National Corporation’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Camden National Corporation’s price-to-free-cash-flow ratio is lower than its industry median ratio of 11.48. This could make Camden National Corporation more attractive because the lower P/FCF ratio indicates that Camden National Corporation 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.

Heritage Commerce Corp.’s Value Grade

Value Grade:

Heritage Commerce Corp is a bank holding company for its wholly owned subsidiary, Heritage Bank of Commerce (the Bank). The Bank offers a full range of commercial banking services to small and medium-sized businesses and their owners, managers and employees. Its lending activities are diversified and include commercial, real estate, construction and land development, consumer and small business administration (SBA) guaranteed loans. The Bank offers a wide range of deposit products for business banking and retail markets. It offers a multitude of other products and services to complement its lending and deposit services. In addition, through its subsidiary, CSNK Working Capital Finance Corp, it provides factoring financing throughout the United States. The Company’s operations are located in the general San Francisco Bay Area of California in the counties of Alameda, Contra Costa, Marin, San Benito, San Francisco, San Mateo, and Santa Clara.

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.

Heritage Commerce Corp. has a Value Score of 75, which is considered to be undervalued.

Heritage Commerce Corp.’s price-earnings ratio is 9.2 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 Heritage Commerce Corp. more attractive for value investors.

Heritage Commerce Corp.’s price-to-book ratio is higher than its peers. This could make Heritage Commerce Corp. less attractive for value investors when compared to the industry median at 0.88.

You can read more about Heritage Commerce 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.

Merchants & Marine Bancorp Inc’s Value Grade

Value Grade:

Merchants & Marine Bancorp, Inc. is a holding company of Merchants & Marine Bank (the Bank). Its principal activity includes ownership and management of the Bank. It generates commercial, mortgage and consumer loans and receives deposits from customers located in Jackson, George, Lamar and Forrest Counties in Mississippi and Baldwin and Mobile Counties in Alabama. The Bank operates under a state bank charter and provides full banking services. Canvas Mortgage, a division of the Bank, originates mortgage loans for sale into the secondary market. CannaFirst Financial, a division of the Bank, provides banking services and regulatory guidance to cannabis business owners and affiliates. Voyager Lending, also a division of the Bank, originates government guaranteed loans to small businesses. The Bank is subject to regulation by federal and state banking regulators. It provides a range of community banking services through its Merchants & Marine Bank and Mississippi River bank divisions.

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.

Merchants & Marine Bancorp Inc has a Value Score of 77, which is considered to be undervalued.

Merchants & Marine Bancorp Inc’s price-earnings ratio is 9.7 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 Merchants & Marine Bancorp Inc more attractive for value investors.

Merchants & Marine Bancorp Inc’s price-to-book ratio is lower than its peers. This could make Merchants & Marine Bancorp Inc fairly attractive for value investors when compared to the industry median at 0.88.

You can read more about Merchants & Marine 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.

Preferred Bank’s Value Grade

Value Grade:

Preferred Bank is an independent commercial bank focusing primarily on the California market. The Bank provides a range of financial services. The Bank offers a range of deposit and loan products and services to both commercial and consumer customers. The Bank provides personalized deposit services as well as real estate finance, commercial loans and trade finance to small and mid-sized businesses, entrepreneurs, real estate developers, professionals, and high net worth individuals. The Bank conducts its banking business from its main office in Los Angeles, California, and through 11 full-service branch banking offices in California (Alhambra, Century City, City of Industry, Torrance, Arcadia, Irvine, Diamond Bar, Pico Rivera, Tarzana, and San Francisco) and one branch in Flushing, New York. In addition, the Bank operates a loan production office in the Houston, Texas suburb of Sugar Land. Its business activities come from the mainstream markets of Southern and Northern California.

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.

Preferred Bank has a Value Score of 92, which is considered to be undervalued.

Preferred Bank’s price-earnings ratio is 7.1 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 Preferred Bank more attractive for value investors.

Preferred Bank’s price-to-book ratio is lower than its peers. This could make Preferred Bank more attractive for value investors when compared to the industry median at 0.88.

You can read more about Preferred 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.

Texas Capital Bancshares Inc’s Value Grade

Value Grade:

Texas Capital Bancshares, Inc. is a bank holding company. The Company, through its subsidiary Texas Capital Bank (the Bank), provides a full-service financial services firm that delivers customized solutions to businesses, entrepreneurs, and individual customers. The Bank offers a full range of products and services, including commercial loans for general corporate purposes, including financing for working capital, organic growth, and acquisitions; real estate term and construction loans; mortgage warehouse lending; treasury management services, including online banking and debit and credit card services; investment banking and advisory services, and letters of credit. It also provides banking services for its individual customers, including personal wealth management and trust services; certificates of deposit; interest and non-interest bearing checking accounts; savings accounts; secured and unsecured loans; online and mobile banking, and investment banking, and advisory 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.

Texas Capital Bancshares Inc has a Value Score of 69, which is considered to be undervalued.

Texas Capital Bancshares Inc’s price-earnings ratio is 18.1 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 Texas Capital Bancshares Inc less attractive for value investors.

Texas Capital Bancshares Inc’s price-to-book ratio is lower than its peers. This could make Texas Capital Bancshares Inc more attractive for value investors when compared to the industry median at 0.88.

You can read more about Texas Capital 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.

First Financial Corp’s Value Grade

Value Grade:

First Financial Corporation is the holding company for First Financial Bank N.A. (the Bank). It offers a variety of financial services including commercial, mortgage and consumer lending, lease financing, trust account services and depositor services through its subsidiary. The Bank's loan portfolio includes commercial loans, real estate mortgages and consumer loans. Its commercial loans are predominately loans to expand a business or finance asset purchases. Its real estate mortgages are secured by 1-4 family residences and are generally owner-occupied and include residential real estate and residential real estate construction loans. Its consumer portfolio primarily consists of home equity loans and lines (typically secured by a subordinate lien on a 1-4 family residence), secured loans (typically secured by automobiles, boats, recreational vehicles, or motorcycles), cash/CD secured, and unsecured loans. The Bank has 70 banking centers in Illinois, Indiana, Kentucky and Tennessee.

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 Financial Corp has a Value Score of 93, which is considered to be undervalued.

First Financial Corp’s price-earnings ratio is 7.8 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 First Financial Corp more attractive for value investors.

First Financial Corp’s price-to-book ratio is higher than its peers. This could make First Financial Corp less attractive for value investors when compared to the industry median at 0.88.

You can read more about First 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.

VersaBank’s Value Grade

Value Grade:

VersaBank is a Canada-based chartered bank. The Bank provides commercial lending and banking services in Canada and the United States, as well as cybersecurity services and banking and financial technology development services through the operations of its wholly owned subsidiary DRT Cyber Inc. (DRTC). It operates through two segments: Digital Banking and DRTC (cybersecurity services). Digital Banking segment obtains its deposits and provides its loans and leases electronically via deposit and lending solutions for financial intermediaries. DRTC segment develops solutions to address the volume of cyber threats challenging financial institutions, multi-national corporations and government entities. Its loan portfolio includes point-of-sale loans and leases, commercial real estate mortgages, commercial real estate loans and public sector and other financing. It also offers tax-free savings accounts, guaranteed investment certificates, and registered retirement savings plans.

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.

VersaBank has a Value Score of 94, which is considered to be undervalued.

VersaBank’s price-earnings ratio is 6.0 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 VersaBank more attractive for value investors.

VersaBank’s price-to-book ratio is higher than its peers. This could make VersaBank less attractive for value investors when compared to the industry median at 0.88.

You can read more about VersaBank’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.

• Camden National Corporation stock has a Value Grade of A.
• Heritage Commerce Corp. stock has a Value Grade of B.
• Merchants & Marine Bancorp Inc stock has a Value Grade of B.
• Preferred Bank stock has a Value Grade of A.
• Texas Capital Bancshares Inc stock has a Value Grade of B.
• First Financial Corp stock has a Value Grade of A.
• VersaBank 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 Tuesday, July 09
• 4 Undervalued Banks Stocks for Monday, July 08
• Why Banco Bbva Argentina SA (ADR)’s (BBAR) Stock Is Up 4.29%
• Why Citizens Financial Services Inc’s (CZFS) Stock Is Up 5.19%

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.