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.

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

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 Tuesday, September 17, 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.

Alerus Financial Corp’s Value Grade

Value Grade:

Alerus Financial Corporation is a diversified financial services company. Through its subsidiary, Alerus Financial, National Association (the Bank), the Company provides financial solutions to businesses and consumers. The Company's segments include Banking, Retirement and Benefit Services, Wealth Management, and Mortgage. The Banking segment offers a complete line of loan, deposit, cash management, and treasury services. The Retirement and Benefit Services segment provides various services, including recordkeeping and administration services to qualified retirement plans; ESOP trustee, recordkeeping, and administration; and investment fiduciary services to retirement plans, among others. The Wealth Management segment provides advisory and planning services, investment management, and trust and fiduciary services. The Mortgage segment offers first and second mortgage loans through a centralized mortgage unit in Minneapolis, Minnesota, as well as through the banking office locations.

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.

Alerus Financial Corp has a Value Score of 64, which is considered to be undervalued.

When you look at Alerus Financial Corp’s price-to-sales ratio at 2.26 compared to the industry median at 2.04, this company has a higher price relative to revenue compared to its peers. This could make Alerus Financial Corp’s stock less attractive for value investors.

Alerus Financial Corp’s price-earnings ratio is 62.90 compared to the industry median at 12.04. This means it has a higher share price relative to earnings compared to its peers. This could make Alerus Financial Corp less attractive for value investors.

Now, let’s assess Alerus Financial Corp’s EV/EBITDA ratio, also known as enterprise multiple. At 0.2, 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. Alerus Financial Corp’s shareholder yield is higher than its industry median ratio of 2.98%. 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. Alerus Financial Corp’s price-to-book ratio is higher than its industry median ratio of 0.99. This could make Alerus Financial Corp less attractive to investors looking for a new addition to their portfolio.

Customers Bancorp Inc’s Value Grade

Value Grade:

Customers Bancorp, Inc. is a bank holding company, which is engaged in banking activities through its subsidiary, Customers Bank (the Bank). The Bank provides banking products, primarily loans and deposits, to businesses and consumers through its branches, limited production offices and administrative offices in Berks County and Southeastern Pennsylvania, New York, Hamilton, New Jersey, Boston, Massachusetts, and other geographies. The Bank administratively supports loans and other financial products, including equipment finance leases, to customers. It also offers venture banking loan portfolios. The Bank serves specialty businesses nationwide, including its commercial loans to mortgage companies, commercial equipment financing, SBA lending, specialty lending and consumer loans through relationships with fintech companies. The Bank’s specialty lending includes fund finance, real estate specialty finance, technology and venture, healthcare, and financial institutions group.

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.

Customers Bancorp Inc has a Value Score of 63, which is considered to be undervalued.

Customers Bancorp Inc’s price-earnings ratio is 6.5 compared to the industry median at 12.0. This means that it has a lower price relative to its earnings compared to its peers. This makes Customers Bancorp Inc more attractive for value investors.

Customers Bancorp Inc’s price-to-book ratio is lower than its peers. This could make Customers Bancorp Inc fairly attractive for value investors when compared to the industry median at 0.99.

You can read more about Customers 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.

Harford Bank’s Value Grade

Value Grade:

Harford Bank (the Bank) provides a full range of banking services. The Bank operates eight banking offices in Harford County, Maryland, and two banking offices in Cecil County, Maryland, with the Bank’s main office located in Aberdeen, Maryland. The Bank is engaged in a general commercial and retail banking business serving individuals, businesses and governmental units in Harford County, Maryland and neighboring counties. It offers deposit services to consumers and commercial entities customary for a state-chartered community bank, including checking accounts, savings accounts, money market accounts, and time deposits consisting of certificates of deposit of various types. Its other banking services include mobile banking, drive-through banking services, automated teller machine services, on-line banking with bill payment, cash management services, commercial account remote deposit capture, safe deposit boxes, direct deposit of payroll and social security checks, and ACH origination.

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.

Harford Bank has a Value Score of 87, which is considered to be undervalued.

Harford Bank’s price-earnings ratio is 7.8 compared to the industry median at 12.0. This means that it has a lower price relative to its earnings compared to its peers. This makes Harford Bank more attractive for value investors.

Harford Bank’s price-to-book ratio is higher than its peers. This could make Harford Bank less attractive for value investors when compared to the industry median at 0.99.

You can read more about Harford 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.

South Plains Financial Inc’s Value Grade

Value Grade:

South Plains Financial, Inc. is the bank holding company for City Bank (the Bank). The Bank is an independent bank in West Texas and has additional banking operations in the Dallas, El Paso, Greater Houston, the Permian Basin, and College Station, Texas markets, and the Ruidoso, New Mexico market. The Bank provides a range of commercial and consumer financial services to small and medium-sized businesses and individuals in its market areas. The Banks principal business activities include commercial and retail banking, along with investment, trust, and mortgage services. The Bank is primarily involved in real estate, commercial, agricultural and consumer lending activities with customers throughout Texas and Eastern New Mexico. The Bank operates about 25 full-service banking locations across seven geographic markets. The Bank also operates about eight loan production offices both in its banking markets and in certain key areas in Texas that focus on mortgage loan origination.

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.

South Plains Financial Inc has a Value Score of 77, which is considered to be undervalued.

South Plains Financial Inc’s price-earnings ratio is 12.4 compared to the industry median at 12.0. This means that it has a higher price relative to its earnings compared to its peers. This makes South Plains Financial Inc less attractive for value investors.

South Plains Financial Inc’s price-to-book ratio is lower than its peers. This could make South Plains Financial Inc more attractive for value investors when compared to the industry median at 0.99.

You can read more about South Plains 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.

TriCo Bancshares’s Value Grade

Value Grade:

TriCo Bancshares is a bank holding company. The Company’s principal business is to serve as the holding company for its subsidiary, Tri Counties Bank, a California-chartered commercial bank (the Bank). In addition, the Company has five capital trusts, which are all wholly owned trust subsidiaries formed for the purpose of issuing trust preferred securities (Trust Preferred Securities) and lending the proceeds to the Company. The Bank provides personal, small business and commercial financial services, including accepting demand, savings and time deposits and making small business, commercial, real estate, and consumer loans, as well as a range of treasury management services and other customary banking services, including safe deposit boxes at some branches. Brokerage services are provided at the Bank’s offices by Tri Counties Wealth Management Advisors. The Bank offers a variety of banking and financial services to both personal, small business and commercial customers.

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.

TriCo Bancshares has a Value Score of 68, which is considered to be undervalued.

TriCo Bancshares’s price-earnings ratio is 12.7 compared to the industry median at 12.0. This means that it has a higher price relative to its earnings compared to its peers. This makes TriCo Bancshares less attractive for value investors.

TriCo Bancshares’s price-to-book ratio is lower than its peers. This could make TriCo Bancshares more attractive for value investors when compared to the industry median at 0.99.

You can read more about TriCo Bancshares’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.

Toronto-Dominion Bank’s Value Grade

Value Grade:

The Toronto-Dominion Bank (the Bank) operates as a bank in North America. The Bank's segments include Canadian Personal and Commercial Banking, which provides financial products and services to personal, small business and commercial customers, and includes TD Auto Finance Canada; U.S. Retail segment, which is comprised of personal and business banking in the United States, operating under the brand TD Bank; Wealth Management and Insurance segment includes the Canadian wealth business which provides investment products and services to institutional and retail investors, and the insurance business which provides property and casualty insurance, as well as life and health insurance products to customers across Canada, and Wholesale Banking segment provides a range of capital markets, investment banking, and corporate banking products and services, including underwriting and distribution of new debt and equity issues, providing advice on strategic acquisitions and divestitures.

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.

Toronto-Dominion Bank has a Value Score of 69, which is considered to be undervalued.

Toronto-Dominion Bank’s price-earnings ratio is 20.2 compared to the industry median at 12.0. This means that it has a higher price relative to its earnings compared to its peers. This makes Toronto-Dominion Bank less attractive for value investors.

Toronto-Dominion Bank’s price-to-book ratio is lower than its peers. This could make Toronto-Dominion Bank more attractive for value investors when compared to the industry median at 0.99.

You can read more about Toronto-Dominion 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.

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.

• Alerus Financial Corp stock has a Value Grade of B.
• Customers Bancorp Inc stock has a Value Grade of B.
• Harford Bank stock has a Value Grade of A.
• South Plains Financial Inc stock has a Value Grade of B.
• TriCo Bancshares stock has a Value Grade of B.
• Toronto-Dominion Bank 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 Tuesday, September 17
• Which Is a Better Investment, Comerica Inc or Merchants Bancorp Stock?
• Which Is a Better Investment, Live Oak Bancshares Inc or United Community Banks Inc Stock?
• 6 Undervalued Banks Stocks for Monday, September 16

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.