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 Monday, September 16, 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.

Bank of the James’s Value Grade

Value Grade:

Bank of the James (the Bank) is a full-service commercial and retail bank. The Bank is a wholly owned subsidiary of Bank of the James Financial Group, Inc. The Bank is engaged in a general retail and commercial banking business. The Bank’s services include personal, business and online banking, loans, and investments. The Bank serves individuals, small and medium-sized businesses and professionals of the Central Virginia area from offices located in Altavista, Amherst, Appomattox, Bedford, Blacksburg, Charlottesville, Forest, Harrisonburg, Lexington, Lynchburg, Madison Heights, Roanoke, Rustburg, and Wytheville. The Bank offers full investment and insurance services through its BOTJ Investment Services division and BOTJ Insurance, Inc. subsidiary. It also provides mortgage loan origination through Bank of the James Mortgage, a division of Bank of the James. It also provides investment advisory services through its wholly owned subsidiary, Pettyjohn, Wood & White, Inc.

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.

Bank of the James has a Value Score of 90, which is considered to be undervalued.

When you look at Bank of the James’s price-to-sales ratio at 1.47 compared to the industry median at 2.03, this company has a lower price relative to revenue compared to its peers. This could make Bank of the James’s stock more attractive for value investors.

Bank of the James’s price-earnings ratio is 7.28 compared to the industry median at 11.95. This means it has a lower share price relative to earnings compared to its peers. This could make Bank of the James more attractive for value investors.

Now, let’s assess Bank of the James’s EV/EBITDA ratio, also known as enterprise multiple. At 3.2, when compared to the industry median of 6.5, 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. Bank of the James’s shareholder yield is lower than its industry median ratio of 3.00%. 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. Bank of the James’s price-to-book ratio is higher than its industry median ratio of 1.00. This could make Bank of the James less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Bank of the James’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Bank of the James’s price-to-free-cash-flow ratio is lower than its industry median ratio of 13.88. This could make Bank of the James more attractive because the lower P/FCF ratio indicates that Bank of the James 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.

Citizens & Northern Corporation’s Value Grade

Value Grade:

Citizens & Northern Corporation is a holding company whose principal activity is community banking. The Company's subsidiaries include Citizens & Northern Bank (the Bank), Citizens & Northern Investment Corporation and Bucktail Life Insurance Company (Bucktail). The Bank is a Pennsylvania banking institution, which provides a range of banking services, including deposit and loan products for personal and commercial customers. The Bank also provides wealth management services through its trust department and C&N; Financial Services, LLC (CNFS). The trust department offers a range of financial services, such as 401(k) plans, retirement planning, estate planning, estate settlements and asset management. It operates over 29 branch offices, including 22 in the Northern tier/Northcentral region of Pennsylvania, one in the Southern tier of New York State, four in Southeastern Pennsylvania and two in Southcentral Pennsylvania. The Bank also has a lending office in Elmira, New York.

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.

Citizens & Northern Corporation has a Value Score of 66, which is considered to be undervalued.

Citizens & Northern Corporation’s price-earnings ratio is 13.0 compared to the industry median at 11.9. This means that it has a higher price relative to its earnings compared to its peers. This makes Citizens & Northern Corporation less attractive for value investors.

Citizens & Northern Corporation’s price-to-book ratio is lower than its peers. This could make Citizens & Northern Corporation more attractive for value investors when compared to the industry median at 1.00.

You can read more about Citizens & Northern Corporation’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 Guaranty Bancshares Inc’s Value Grade

Value Grade:

First Guaranty Bancshares, Inc. is the holding company for First Guaranty Bank (the Bank). The Bank offers a range of financial services and focuses on building client relationships and providing customer service. The Bank operates about 36 locations throughout Louisiana, Texas, Kentucky, and West Virginia. The Banks principal business consists of attracting deposits from the general public and local municipalities in its market areas and then investing those deposits. The Bank also generates funds from operations, borrowings in lending and investing in securities. The Bank serves the credit needs of its customer base, including commercial real estate loans, commercial and industrial loans, commercial leases, and others. The Bank offers a variety of deposit accounts to consumers, small businesses, and municipalities, including personal and business checking and savings accounts, time deposits and money market accounts. In addition, the Bank offers a range of consumer 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.

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

First Guaranty Bancshares Inc’s price-earnings ratio is 12.9 compared to the industry median at 11.9. This means that it has a higher price relative to its earnings compared to its peers. This makes First Guaranty Bancshares Inc less attractive for value investors.

First Guaranty Bancshares Inc’s price-to-book ratio is higher than its peers. This could make First Guaranty Bancshares Inc less attractive for value investors when compared to the industry median at 1.00.

You can read more about First Guaranty 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.

Great American Bancorp Inc’s Value Grade

Value Grade:

Great American Bancorp, Inc. is a thrift holding company. The Company's principal activity is the ownership and management of its wholly owned subsidiary, First Federal Savings Bank of Champaign-Urbana (the Bank). The Bank is primarily engaged in providing a full range of banking and financial services to individual and corporate customers in Champaign County, Illinois. The Bank also provides full-service brokerage activities through a third-party broker-dealer and engages in the sale of tax-deferred annuities. The Bank’s subsidiary, Park Avenue Service Corporation (PASC), offers insurance services to customers located primarily in Illinois. GTPS Insurance Agency, a division of PASC, sells a variety of insurance products to both individuals and businesses, including life, health, auto, property and casualty insurance. It grants mortgage, commercial and consumer loans to customers. The Bank operates through two full-service offices located in Champaign and Urbana, Illinois.

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.

Great American Bancorp Inc has a Value Score of 94, which is considered to be undervalued.

Great American Bancorp Inc’s price-earnings ratio is 5.2 compared to the industry median at 11.9. This means that it has a lower price relative to its earnings compared to its peers. This makes Great American Bancorp Inc more attractive for value investors.

Great American Bancorp Inc’s price-to-book ratio is higher than its peers. This could make Great American Bancorp Inc less attractive for value investors when compared to the industry median at 1.00.

You can read more about Great American 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.

Hilltop Holdings Inc.’s Value Grade

Value Grade:

Hilltop Holdings Inc. is a diversified financial holding company. The Company operates through three segments: banking, broker-dealer, and mortgage origination. The banking segment includes the operations of PlainsCapital Bank (the Bank). The banking segment primarily provides business and consumer banking services from offices located throughout Texas and generates revenue from its portfolio of earning assets. The broker-dealer segment includes the operations of Securities Holdings, which operates through its wholly owned subsidiaries, Hilltop Securities, Momentum Independent Network and Hilltop Securities Asset Management, LLC. This segment offers investment advisory and securities brokerage services. The mortgage origination segment includes the operations of PrimeLending, which offers a variety of loan products. This segment includes origination and servicing of loans and selling these loans in the secondary market.

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.

Hilltop Holdings Inc. has a Value Score of 70, which is considered to be undervalued.

Hilltop Holdings Inc.’s price-earnings ratio is 18.5 compared to the industry median at 11.9. This means that it has a higher price relative to its earnings compared to its peers. This makes Hilltop Holdings Inc. less attractive for value investors.

Hilltop Holdings Inc.’s price-to-book ratio is lower than its peers. This could make Hilltop Holdings Inc. fairly attractive for value investors when compared to the industry median at 1.00.

You can read more about Hilltop Holdings 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.

Norwood Financial Corp’s Value Grade

Value Grade:

Norwood Financial Corp is a holding company for Wayne Bank (the Bank). The Bank is an independent community bank with about 15 offices in Northeastern Pennsylvania and 14 offices in Delaware, Sullivan, Ontario, Otsego and Yates Counties, New York. The Bank offers a variety of personal and business credit services and trust and investment products and real estate settlement services to the consumers, businesses, nonprofit organizations, and municipalities in each of the communities that the Bank serves. The Bank serves the northeastern Pennsylvania counties of Wayne, Pike, Monroe, Lackawanna and Luzerne and, to a much lesser extent, Susquehanna County in addition to the New York counties of Delaware, Sullivan, Ontario, Otsego and Yates. The Bank operates automated teller machines at twenty-nine branch facilities plus one machine at an off-site location. The Bank operates a Wealth Management/Trust Department which provides estate planning, investment management and financial planning.

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.

Norwood Financial Corp has a Value Score of 68, which is considered to be undervalued.

Norwood Financial Corp’s price-earnings ratio is 17.3 compared to the industry median at 11.9. This means that it has a higher price relative to its earnings compared to its peers. This makes Norwood Financial Corp less attractive for value investors.

Norwood Financial Corp’s price-to-book ratio is lower than its peers. This could make Norwood Financial Corp more attractive for value investors when compared to the industry median at 1.00.

You can read more about Norwood 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 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.

• Bank of the James stock has a Value Grade of A.
• Citizens & Northern Corporation stock has a Value Grade of B.
• First Guaranty Bancshares Inc stock has a Value Grade of B.
• Great American Bancorp Inc stock has a Value Grade of A.
• Hilltop Holdings Inc. stock has a Value Grade of B.
• Norwood Financial Corp 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 Monday, September 16
• Which Is a Better Investment, Banco Bbva Argentina SA (ADR) or TowneBank Stock?
• Which Is a Better Investment, FB Financial Corp or TowneBank Stock?
• Which Is a Better Investment, OFG Bancorp or TowneBank Stock?

AAII Disclaimer

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