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 Tuesday, August 06, 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.

First Bancshares Inc (Mississippi)’s Value Grade

Value Grade:

The First Bancshares, Inc. is a bank holding company for The First Bank (the First). The Company is a community-focused financial institution that offers a full range of financial services to individuals, businesses, municipal entities and nonprofit organizations in the communities that it serves. These services include consumer and commercial loans, deposit accounts and safe deposit services. It offers a full range of deposit services that are available in banks and savings institutions, including checking accounts, NOW accounts, savings accounts, and other time deposits of various types, ranging from daily money market accounts to longer-term certificates of deposit. It offers a full range of commercial and personal loans. Commercial loans include both secured and unsecured loans for working capital, business expansion, purchase of equipment and machinery, and others. Its segments include the Commercial/Retail Bank, the Mortgage Banking Division, and the Holding Company.

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 Bancshares Inc (Mississippi) has a Value Score of 70, which is considered to be undervalued.

When you look at First Bancshares Inc (Mississippi)’s price-to-sales ratio at 2.78 compared to the industry median at 1.91, this company has a higher price relative to revenue compared to its peers. This could make First Bancshares Inc (Mississippi)’s stock less attractive for value investors.

First Bancshares Inc (Mississippi)’s price-earnings ratio is 13.16 compared to the industry median at 11.11. This means it has a higher share price relative to earnings compared to its peers. This could make First Bancshares Inc (Mississippi) less attractive for value investors.

Now, let’s assess First Bancshares Inc (Mississippi)’s EV/EBITDA ratio, also known as enterprise multiple. At 6.1, when compared to the industry median of 6.9, 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. First Bancshares Inc (Mississippi)’s shareholder yield is lower than its industry median ratio of 3.31%. 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. First Bancshares Inc (Mississippi)’s price-to-book ratio is higher than its industry median ratio of 0.93. This could make First Bancshares Inc (Mississippi) less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at First Bancshares Inc (Mississippi)’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. First Bancshares Inc (Mississippi)’s price-to-free-cash-flow ratio is lower than its industry median ratio of 12.36. This could make First Bancshares Inc (Mississippi) more attractive because the lower P/FCF ratio indicates that First Bancshares Inc (Mississippi) 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.

F & M Bank Corp’s Value Grade

Value Grade:

F & M Bank Corp. is a one-bank holding company. The Company operates through its banking subsidiaries, Farmers & Merchants Bank (Bank) and VSTitle, LLC (VST). The Bank is a state-chartered bank. As a commercial bank, the Bank offers a range of banking services, including commercial and individual demand and time deposit accounts, commercial and individual loans, Internet and mobile banking, drive-in banking services, automated teller machines (ATMs), as well as a courier service for its commercial banking customers. The Bank provides various types of commercial and consumer loans and has a large portfolio of residential mortgages and indirect auto loans. VST provides title insurance services to the customers in its market area, including VBS Mortgage, LLC (F&M; Mortgage) and the Bank. The Bank operates approximately 14 branches and a dealer finance division in the Shenandoah Valley of Virginia. The Dealer Finance Division specializes in providing automobile financing.

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.

F & M Bank Corp has a Value Score of 79, which is considered to be undervalued.

F & M Bank Corp’s price-earnings ratio is 22.6 compared to the industry median at 11.1. This means that it has a higher price relative to its earnings compared to its peers. This makes F & M Bank Corp less attractive for value investors.

F & M Bank Corp’s price-to-book ratio is lower than its peers. This could make F & M Bank Corp fairly attractive for value investors when compared to the industry median at 0.93.

You can read more about F & M Bank 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.

ING Groep NV (ADR)’s Value Grade

Value Grade:

ING Groep N.V. (ING) is a financial institution. The Company offers banking services. The Company's segments include Retail Netherlands, which offers current and savings accounts, business lending, mortgages and other consumer lending in the Netherlands; Retail Belgium, which offers products that are similar to those in the Netherlands; Retail Germany, which offers current and savings accounts, mortgages and other customer lending; Retail Other, which offers products that are similar to those in the Netherlands, and Wholesale Banking, which offers wholesale banking activities (a full range of products from cash management to corporate finance), real estate and lease. The Company's Retail Banking business lines provide products and services to individuals, small and medium-sized enterprises (SMEs) and mid-corporates. ING's banking activities in Australia are undertaken by ING Bank (Australia) Limited (trading as ING Direct) and ING Bank NV Sydney Branch.

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.

ING Groep NV (ADR) has a Value Score of 95, which is considered to be undervalued.

ING Groep NV (ADR)’s price-earnings ratio is 7.5 compared to the industry median at 11.1. This means that it has a lower price relative to its earnings compared to its peers. This makes ING Groep NV (ADR) more attractive for value investors.

ING Groep NV (ADR)’s price-to-book ratio is lower than its peers. This could make ING Groep NV (ADR) more attractive for value investors when compared to the industry median at 0.93.

You can read more about ING Groep NV (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.

Lloyds Banking Group PLC (ADR)’s Value Grade

Value Grade:

Lloyds Banking Group plc is a United Kingdom-based financial services company. The Company provides a range of banking and financial services that is focused primarily on retail and commercial customers. It operates through three segments: Retail, Commercial Banking, and Insurance, Pensions and Investments. The Retail segment offers a range of financial services products to personal customers, including current accounts, savings, mortgages, credit cards, unsecured loans, motor finance and leasing solutions. The Commercial Banking segment serves small and medium businesses, as well as corporate and institutional clients, providing lending, transactional banking, working capital management, debt financing and risk management services. The Insurance, Pensions and Investments segment offers insurance, investment and pension management products and services. This segment helps customers with their long-term protection, retirement and investment needs.

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.

Lloyds Banking Group PLC (ADR) has a Value Score of 97, which is considered to be undervalued.

Lloyds Banking Group PLC (ADR)’s price-earnings ratio is 7.1 compared to the industry median at 11.1. This means that it has a lower price relative to its earnings compared to its peers. This makes Lloyds Banking Group PLC (ADR) more attractive for value investors.

Lloyds Banking Group PLC (ADR)’s price-to-book ratio is higher than its peers. This could make Lloyds Banking Group PLC (ADR) less attractive for value investors when compared to the industry median at 0.93.

You can read more about Lloyds Banking Group PLC (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.

PB Bankshares Inc’s Value Grade

Value Grade:

PB Bankshares, Inc. is a bank holding company for Presence Bank (the Bank). Its principal business consists of attracting retail and commercial deposits from the general public in its market area and investing those deposits, together with funds generated from operations and borrowings, primarily in commercial real estate loans, commercial and industrial loans, construction, home equity lines of credit and to a lesser extent, one-to four-family residential real estate loans and consumer loans. It offers a variety of deposit accounts, including demand deposit accounts, savings accounts, money market accounts and certificate of deposit accounts. Its community-oriented bank offers a variety of financial products and services to meet the needs of its customers. The Bank operates four banking offices and two loan production offices in Chester, Lancaster and Dauphin Counties, Pennsylvania. The Bank also serves customers in Cumberland and Lebanon Counties.

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.

PB Bankshares Inc has a Value Score of 78, which is considered to be undervalued.

PB Bankshares Inc’s price-earnings ratio is 20.2 compared to the industry median at 11.1. This means that it has a higher price relative to its earnings compared to its peers. This makes PB Bankshares Inc less attractive for value investors.

PB Bankshares Inc’s price-to-book ratio is higher than its peers. This could make PB Bankshares Inc less attractive for value investors when compared to the industry median at 0.93.

You can read more about PB Bankshares 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.

• First Bancshares Inc (Mississippi) stock has a Value Grade of B.
• F & M Bank Corp stock has a Value Grade of B.
• ING Groep NV (ADR) stock has a Value Grade of A.
• Lloyds Banking Group PLC (ADR) stock has a Value Grade of A.
• PB Bankshares 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 Tuesday, August 06
• 7 Undervalued Banks Stocks for Monday, August 05
• Which Is a Better Investment, Atlantic Union Bankshares Corp or Customers Bancorp Inc Stock?
• Which Is a Better Investment, Axos Financial Inc or Customers Bancorp Inc Stock?

AAII Disclaimer

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