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 Wednesday, August 21, 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.

Brookline Bancorp, Inc.’s Value Grade

Value Grade:

Brookline Bancorp, Inc. is a bank holding company for Brookline Bank, Bank Rhode Island (BankRI), PCSB Bank (the Banks). The Bank offers a range of commercial, business and retail banking services, including a full complement of cash management products, on-line banking services, and consumer and residential loans and investment services, designed to meet the financial needs of small-to mid-sized businesses and individuals throughout Central New England and the Lower Hudson Valley in New York. Its specialty lending activities, including equipment financing, are focused on the New York and New Jersey metropolitan area, with services offered throughout the United States. The Bank, through its subsidiary Eastern Funding LLC, conducts equipment financing activities in the greater New York and New Jersey metropolitan area and elsewhere in the United States. The Bank operates 29 full-service banking offices and two lending offices in the greater Boston metropolitan 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.

Brookline Bancorp, Inc. has a Value Score of 88, which is considered to be undervalued.

When you look at Brookline Bancorp, Inc.’s price-to-sales ratio at 1.42 compared to the industry median at 1.97, this company has a lower price relative to revenue compared to its peers. This could make Brookline Bancorp, Inc.’s stock more attractive for value investors.

Brookline Bancorp, Inc.’s price-earnings ratio is 11.30 compared to the industry median at 11.50. This means it has a lower share price relative to earnings compared to its peers. This could make Brookline Bancorp, Inc. more attractive for value investors.

Now, let’s assess Brookline Bancorp, Inc.’s EV/EBITDA ratio, also known as enterprise multiple. At 4.4, when compared to the industry median of 6.4, 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. Brookline Bancorp, Inc.’s shareholder yield is higher than its industry median ratio of 3.21%. 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. Brookline Bancorp, Inc.’s price-to-book ratio is lower than its industry median ratio of 0.97. This could make Brookline Bancorp, Inc. more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Brookline Bancorp, Inc.’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Brookline Bancorp, Inc.’s price-to-free-cash-flow ratio is higher than its industry median ratio of 13.26. This could make Brookline Bancorp, Inc. less attractive because the higher P/FCF ratio indicates that Brookline Bancorp, 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.

Firstsun Capital Bancorp’s Value Grade

Value Grade:

FirstSun Capital Bancorp is a financial holding company. The Company provides a full spectrum of deposit, lending, treasury management, wealth management and online banking products and services through its two wholly owned subsidiaries, Sunflower Bank, National Association (the Bank), Logia Portfolio Management, LLC and FEIF Capital Partners, LLC. The Bank offers a range of specialized financial services to business customers as well as relationship-focused services for its customers and has a branch network in Texas, Kansas, Colorado, New Mexico, Arizona and Washington, as well as mortgage banking capabilities in 43 states. Its product line includes commercial loans and commercial real estate loans, residential mortgage and other consumer loans, a variety of commercial, consumer and private banking deposit products, including noninterest-bearing accounts, interest-bearing demand products, money market accounts and certificates of deposit and treasury management products and 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.

Firstsun Capital Bancorp has a Value Score of 62, which is considered to be undervalued.

Firstsun Capital Bancorp’s price-earnings ratio is 12.3 compared to the industry median at 11.5. This means that it has a higher price relative to its earnings compared to its peers. This makes Firstsun Capital Bancorp less attractive for value investors.

Firstsun Capital Bancorp’s price-to-book ratio is lower than its peers. This could make Firstsun Capital Bancorp more attractive for value investors when compared to the industry median at 0.97.

You can read more about Firstsun Capital 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.

Investar Holding Corp’s Value Grade

Value Grade:

Investar Holding Corporation is a financial holding company that conducts its operations primarily through its subsidiary, Investar Bank, National Association (the Bank). The Company offers a range of commercial and retail lending products throughout its market areas, including business loans to small to medium-sized businesses as well as loans to individuals. Its business lending products include owner-occupied commercial real estate loans, construction loans and commercial and industrial loans, such as term loans, equipment financing and lines of credit, while its loans to individuals include first and second mortgage loans, installment loans, and lines of credit. It offers a base of deposit products and services to individual and business clients, including savings, checking, and money market accounts, as well as a variety of certificates of deposit and individual retirement accounts. It also offers debit cards, Internet banking, direct deposit of payroll and social security checks.

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.

Investar Holding Corp has a Value Score of 90, which is considered to be undervalued.

Investar Holding Corp’s price-earnings ratio is 11.2 compared to the industry median at 11.5. This means that it has a lower price relative to its earnings compared to its peers. This makes Investar Holding Corp more attractive for value investors.

Investar Holding Corp’s price-to-book ratio is higher than its peers. This could make Investar Holding Corp less attractive for value investors when compared to the industry median at 0.97.

You can read more about Investar Holding 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.

Landmark Bancorp Inc’s Value Grade

Value Grade:

Landmark Bancorp, Inc. is a financial holding company. The Company’s business consists of the ownership of Landmark National Bank (the Bank) and Landmark Risk Management, Inc., which are wholly owned subsidiaries of the Company. The Bank's primary deposit gathering and lending markets are geographically diversified throughout central, eastern, southeast, and southwest Kansas. The Bank is principally engaged in the business of attracting deposits from the general public and using such deposits, together with borrowings and other funds, to originate one-to-four family residential real estate, construction and land, commercial real estate, commercial, agricultural, municipal and consumer loans. The Bank also invests in certain investment and mortgage-related securities using deposits and other borrowings as funding sources. Landmark Risk Management, Inc. is a captive insurance company, which provides property and casualty insurance coverage to the Company and the Bank.

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.

Landmark Bancorp Inc has a Value Score of 86, which is considered to be undervalued.

Landmark Bancorp Inc’s price-earnings ratio is 10.0 compared to the industry median at 11.5. This means that it has a lower price relative to its earnings compared to its peers. This makes Landmark Bancorp Inc more attractive for value investors.

Landmark Bancorp Inc’s price-to-book ratio is higher than its peers. This could make Landmark Bancorp Inc less attractive for value investors when compared to the industry median at 0.97.

You can read more about Landmark 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.

Uwharrie Capital Corp’s Value Grade

Value Grade:

Uwharrie Capital Corp is a bank holding company for Uwharrie Bank (the Bank), a North Carolina commercial bank. Its operations are primarily retail-oriented and directed to individuals and small to medium-sized businesses. The Bank provides traditional commercial and consumer banking services, including personal and commercial checking and savings accounts, money market accounts, certificates of deposit, individual retirement accounts, and related business and individual banking services. The Bank’s lending activities include commercial loans and various consumer-type loans to individuals, including installment loans, mortgage loans, equity lines of credit and overdraft checking credit. The Bank also offers Internet banking, mobile banking, 24-hour telephone banking, and issues Visa check cards, an electronic banking card. The Company and its subsidiaries conduct their operations in Stanly County, Anson County, Cabarrus County, Randolph County and Mecklenburg County, North Carolina.

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.

Uwharrie Capital Corp has a Value Score of 90, which is considered to be undervalued.

Uwharrie Capital Corp’s price-earnings ratio is 6.6 compared to the industry median at 11.5. This means that it has a lower price relative to its earnings compared to its peers. This makes Uwharrie Capital Corp more attractive for value investors.

Uwharrie Capital Corp’s price-to-book ratio is lower than its peers. This could make Uwharrie Capital Corp more attractive for value investors when compared to the industry median at 0.97.

You can read more about Uwharrie Capital 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.

Waterstone Financial Inc’s Value Grade

Value Grade:

Waterstone Financial, Inc. is the savings and loan holding company for WaterStone Bank SSB (the Bank). The Bank offers a suite of personal and business banking products. The Company's segments include community banking and mortgage banking. The community banking segment provides consumer and business banking products and services to customers. Its consumer products include loan products, deposit products, and personal investment services. Its business banking products include loans for working capital, inventory and general corporate use, commercial real estate construction loans, and deposit accounts. The mortgage banking segment, which is conducted through Waterstone Mortgage Corporation, consists of originating residential mortgage loans primarily for sale in the secondary market. The Bank has branches in Wauwatosa/State St, Brookfield, Fox Point/North Shore, Franklin/Hales Corners, Germantown/Menomonee Falls, Milwaukee/Oklahoma Ave, Oak Creek/Howell Ave and various 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.

Waterstone Financial Inc has a Value Score of 80, which is considered to be undervalued.

Waterstone Financial Inc’s price-earnings ratio is 22.5 compared to the industry median at 11.5. This means that it has a higher price relative to its earnings compared to its peers. This makes Waterstone Financial Inc less attractive for value investors.

Waterstone Financial Inc’s price-to-book ratio is higher than its peers. This could make Waterstone Financial Inc less attractive for value investors when compared to the industry median at 0.97.

You can read more about Waterstone Financial 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 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.

• Brookline Bancorp, Inc. stock has a Value Grade of A.
• Firstsun Capital Bancorp stock has a Value Grade of B.
• Investar Holding Corp stock has a Value Grade of A.
• Landmark Bancorp Inc stock has a Value Grade of A.
• Uwharrie Capital Corp stock has a Value Grade of A.
• Waterstone Financial Inc stock has a Value Grade of B.

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 Wednesday, August 21
• Which Is a Better Investment, Eastern Bankshares Inc or United Community Banks Inc Stock?
• Which Is a Better Investment, Independent Bank Group Inc or United Community Banks Inc Stock?
• Which Is a Better Investment, Merchants Bancorp or Renasant Corp Stock?

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.