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, September 24, 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.

ESSA Bancorp Inc’s Value Grade

Value Grade:

ESSA Bancorp, Inc. is a holding company for ESSA Bank & Trust (the Bank). The Bank is a chartered savings bank. The Bank has two regional offices in Allentown and Devon, and operates 21 community offices throughout the greater Pocono, Lehigh Valley, Scranton/Wilkes-Barre and suburban Philadelphia areas. The Bank’s primary business consists of the taking of deposits and granting of loans to customers generally in Monroe, Northampton, Lehigh, Delaware, Chester, Montgomery, Lackawanna and Luzerne Counties, Pennsylvania. Its personal banking services include personal checking, personal savings, certificates of deposit, money market account, individual retirement accounts (IRAs), online banking, mobile banking, mobile deposit, online bill pay, e-statements, Zelle, Debit Mastercard and others. Its business banking services include business checking, IOLTA checking, government checking, commercial and industrial loans, commercial real estate loans, government financing and credit and 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.

ESSA Bancorp Inc has a Value Score of 93, which is considered to be undervalued.

When you look at ESSA Bancorp Inc’s price-to-sales ratio at 1.74 compared to the industry median at 2.07, this company has a lower price relative to revenue compared to its peers. This could make ESSA Bancorp Inc’s stock more attractive for value investors.

ESSA Bancorp Inc’s price-earnings ratio is 10.31 compared to the industry median at 12.11. This means it has a lower share price relative to earnings compared to its peers. This could make ESSA Bancorp Inc more attractive for value investors.

Now, let’s assess ESSA Bancorp Inc’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. ESSA Bancorp Inc’s shareholder yield is higher than its industry median ratio of 2.95%. 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. ESSA Bancorp Inc’s price-to-book ratio is lower than its industry median ratio of 1.01. This could make ESSA Bancorp Inc more attractive to investors looking for a new addition to their portfolio.

First Bancorp’s Value Grade

Value Grade:

First BanCorp. is a financial holding company. As of December 31, 2016, the Company controlled two subsidiaries: FirstBank Puerto Rico (the Bank or FirstBank) and FirstBank Insurance Agency, Inc. (FirstBank Insurance Agency). It operates in six segments: Commercial and Corporate Banking, which consists of lending and other services; Consumer (Retail) Banking, which consists of consumer lending and deposit-taking activities; Mortgage Banking, which consists of the origination, sale, and servicing of a range of residential mortgage loan products and related hedging activities; Treasury and Investments, which consists of treasury and investment management functions; United States Operations, which consists of all banking activities conducted by FirstBank on the United States mainland, and Virgin Islands Operations, which consists of banking activities conducted by FirstBank in the United States Virgin Islands and British Virgin Islands, including retail and commercial banking 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 Bancorp has a Value Score of 72, which is considered to be undervalued.

First Bancorp’s price-earnings ratio is 11.3 compared to the industry median at 12.1. This means that it has a lower price relative to its earnings compared to its peers. This makes First Bancorp more attractive for value investors.

First Bancorp’s price-to-book ratio is lower than its peers. This could make First Bancorp more attractive for value investors when compared to the industry median at 1.01.

You can read more about First 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.

First Northwest BanCorp’s Value Grade

Value Grade:

First Northwest Bancorp is a bank holding company and a financial holding company. The Company is engaged in banking activities through its wholly owned subsidiary, First Fed Bank (the Bank), as well as certain non-banking financial activities. Its non-financial investments include several limited partnership investments, including a 33% interest in The Meriwether Group, LLC (MWG), a boutique investment bank focusing on providing entrepreneurs with resources to help them, including equity and debt-raising services along with strategic positioning of business, throughout the United States. First Fed Bank is a community-oriented financial institution. The Bank operates in 18 locations, including twelve full-service branches, three business centers, and three administration centers located in Clallam, Jefferson, King, Kitsap, and Whatcom counties. It is focused on delivering a full array of financial products and services for individuals, small businesses, 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.

First Northwest BanCorp has a Value Score of 92, which is considered to be undervalued.

First Northwest BanCorp’s price-to-book ratio is higher than its peers. This could make First Northwest BanCorp less attractive for value investors when compared to the industry median at 1.01.

You can read more about First Northwest 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 87, which is considered to be undervalued.

Investar Holding Corp’s price-earnings ratio is 12.6 compared to the industry median at 12.1. This means that it has a higher price relative to its earnings compared to its peers. This makes Investar Holding Corp less 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 1.01.

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.

Metrocity Bankshares Inc’s Value Grade

Value Grade:

MetroCity Bankshares, Inc. is a bank holding company. It operates through its banking subsidiary, Metro City Bank (the Bank), which is a Georgia state-chartered commercial bank. It offers a suite of loan and deposit products. The Bank operates over 20 full-service branch locations in multi-ethnic communities in Alabama, Florida, Georgia, New York, New Jersey, Texas and Virginia. It offers customary banking services, such as consumer and commercial checking accounts, savings accounts, certificates of deposit, commercial and consumer loans, including single family residential loans, money transfers and a variety of other banking services. It offers traditional depository products, including checking, savings, money market and certificates of deposits. It also offers a full suite of online banking solutions, including access to account balances, online transfers, online bill payment and electronic delivery of customer statements, mobile banking solutions for iPhone and Android phones.

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.

Metrocity Bankshares Inc has a Value Score of 62, which is considered to be undervalued.

Metrocity Bankshares Inc’s price-earnings ratio is 14.4 compared to the industry median at 12.1. This means that it has a higher price relative to its earnings compared to its peers. This makes Metrocity Bankshares Inc less attractive for value investors.

Metrocity Bankshares Inc’s price-to-book ratio is lower than its peers. This could make Metrocity Bankshares Inc more attractive for value investors when compared to the industry median at 1.01.

You can read more about Metrocity 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.

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 12.6 compared to the industry median at 12.1. 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 1.01.

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.

Tri City Bankshares Corp’s Value Grade

Value Grade:

Tri City Bankshares Corporation is a bank holding company, which offers a range of financial products and services to external customers, including accepting deposits and originating residential, consumer and commercial loans. It operates through the community banking segment. Its wholly owned subsidiary is Tri City National Bank (the Bank). The Bank's personal banking services include checking accounts, savings and certificate of deposits, health savings accounts, individual retirement accounts, credit cards, and investments. The Bank's business banking services include business loans, business checking, business savings and certificate of deposits, health savings account (HSA) for employers, business credit cards, business services, business fraud prevention, and municipal banking. The Bank's mortgages and loans include mortgages, auto loans, personal loans, and business loans. The Bank's additional services include safe deposit boxes, gift cards, and 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.

Tri City Bankshares Corp has a Value Score of 90, which is considered to be undervalued.

Tri City Bankshares Corp’s price-earnings ratio is 9.1 compared to the industry median at 12.1. This means that it has a lower price relative to its earnings compared to its peers. This makes Tri City Bankshares Corp more attractive for value investors.

Tri City Bankshares Corp’s price-to-book ratio is higher than its peers. This could make Tri City Bankshares Corp less attractive for value investors when compared to the industry median at 1.01.

You can read more about Tri City Bankshares 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 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.

• ESSA Bancorp Inc stock has a Value Grade of A.
• First Bancorp stock has a Value Grade of B.
• First Northwest BanCorp stock has a Value Grade of A.
• Investar Holding Corp stock has a Value Grade of A.
• Metrocity Bankshares Inc stock has a Value Grade of B.
• South Plains Financial Inc stock has a Value Grade of B.
• Tri City Bankshares Corp 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, September 24
• Which Is a Better Investment, Banco Bbva Argentina SA (ADR) or Comerica Inc Stock?
• Which Is a Better Investment, Banco Bbva Argentina SA (ADR) or Merchants Bancorp Stock?
• Which Is a Better Investment, Merchants Bancorp or TowneBank Stock?

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