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 Tuesday, October 01, 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.

Citizens Financial Services Inc’s Value Grade

Value Grade:

Citizens Financial Services, Inc. is a bank holding company for First Citizens Community Bank (the Bank). The Bank is a full-service bank engaged in a range of banking activities and services for individual, business, governmental and institutional customers. These activities and services principally include checking, savings, and time deposit accounts; residential, commercial, and agricultural real estate, commercial and industrial, state and political subdivision and consumer loans; and a variety of other specialized financial services. The Trust and Investment division of the Bank offers a full range of client investment, estate, mineral management, and retirement services. The Bank operates 39 full-service offices, one limited branch office, and four mortgage centers in its market areas. It is engaged in the ownership and management of CZFS Acquisition Company, LLC, its subsidiary, the Bank and the Banks subsidiaries, First Citizens Insurance Agency, Inc. and 1st Realty of PA LLC.

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 Financial Services Inc has a Value Score of 63, which is considered to be undervalued.

When you look at Citizens Financial Services Inc’s price-to-sales ratio at 1.85 compared to the industry median at 2.06, this company has a lower price relative to revenue compared to its peers. This could make Citizens Financial Services Inc’s stock more attractive for value investors.

Citizens Financial Services Inc’s price-earnings ratio is 10.19 compared to the industry median at 12.03. This means it has a lower share price relative to earnings compared to its peers. This could make Citizens Financial Services Inc more attractive for value investors.

Now, let’s assess Citizens Financial Services Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 9.5, when compared to the industry median of 6.5, the company may be considered overvalued 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. Citizens Financial Services Inc’s shareholder yield is lower than its industry median ratio of 2.99%. 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. Citizens Financial Services Inc’s price-to-book ratio is lower than its industry median ratio of 1.01. This could make Citizens Financial Services Inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Citizens Financial Services Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Citizens Financial Services Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 14.00. This could make Citizens Financial Services Inc more attractive because the lower P/FCF ratio indicates that Citizens Financial Services 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.

First Capital Inc’s Value Grade

Value Grade:

First Capital, Inc. is the holding company for First Harrison Bank (the Bank). The Bank is a chartered commercial bank, which provides a variety of banking services to individuals and business customers. The Bank primarily provides real estate mortgage loans. The Bank originates mortgage loans for sale in the secondary market. The Bank also originates consumer loans and residential construction loans for the loan portfolio. First Harrison Investments, Inc. and First Harrison Holdings, Inc. are wholly owned subsidiaries of the Bank that jointly own First Harrison, LLC, which holds and manages an investment securities portfolio. First Harrison REIT, Inc. is a wholly owned subsidiary of First Harrison Holdings, Inc., which holds a portion of the Bank’s real estate mortgage loan portfolio. The Bank has about 18 offices in the Indiana communities of Corydon, Edwardsville, Greenville, Floyds Knobs, Palmyra, New Albany, New Salisbury, Jeffersonville, Lanesville, and Charlestown 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.

First Capital Inc has a Value Score of 86, which is considered to be undervalued.

First Capital Inc’s price-earnings ratio is 9.7 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 First Capital Inc more attractive for value investors.

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

You can read more about First Capital 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.

Metropolitan Bank Holding Corp’s Value Grade

Value Grade:

Metropolitan Bank Holding Corp. is a bank holding company. The Company, through its subsidiary, Metropolitan Commercial Bank, a New York state-chartered bank, provides a range of business, commercial and retail banking products and services to small businesses, middle-market enterprises, public entities and affluent individuals in the New York metropolitan area. In addition to traditional commercial banking products, the Company offers corporate cash management and retail banking services, and, through Global Payments Group, provides global payments business services to non-bank financial service companies (referred to as Banking-as-a-Service) by serving as an issuing bank for third-party debit card programs, while also providing such companies with other financial infrastructure components, including cash settlement and custodian deposit services. Its commercial real estate products include acquisition loans, renovation loans, loans on owner-occupied properties and construction loans.

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.

Metropolitan Bank Holding Corp has a Value Score of 83, which is considered to be undervalued.

Metropolitan Bank Holding Corp’s price-earnings ratio is 8.4 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 Metropolitan Bank Holding Corp more attractive for value investors.

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

You can read more about Metropolitan Bank 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.

Patriot National Bancorp Inc’s Value Grade

Value Grade:

Patriot National Bancorp, Inc. is a one-bank holding company for Patriot Bank, N.A (the Bank). The Bank has a total of nine branch offices comprised of eight branch offices located in Fairfield and New Haven Counties, Connecticut and one branch office located in Westchester County, New York. It offers commercial real estate loans, commercial business loans, small business administration (SBA) loans and a variety of consumer loans to individuals, small and medium-sized businesses and professionals. Its consumer and commercial deposit accounts offering include checking, interest-bearing negotiable order of withdrawal, money market, time certificates of deposit, savings, prepaid deposit accounts, on-line national money market accounts, certificate of deposit account registry service, individual retirement accounts and others. Other services offered by the Bank include lockbox, Internet banking, bill paying, remote deposit capture, debit cards, money orders, travelers' checks, and ATMs.

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.

Patriot National Bancorp Inc has a Value Score of 81, which is considered to be undervalued.

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

You can read more about Patriot National 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.

Republic Bancorp Inc’s Value Grade

Value Grade:

Republic Bancorp, Inc. is a financial holding company of Republic Bank & Trust Company (the Bank) and Republic Insurance Services, Inc (the Captive). The Bank provides both traditional and non-traditional banking products. Its segments include Traditional Banking, Warehouse, Mortgage Banking, Tax Refund Solutions (TRS), Republic Payment Solutions (RPS), and Republic Credit Solutions (RCS). Its Traditional Banking products and services are offered through the Company's traditional RB&T; brand. The Warehouse segment provides short-term, revolving credit facilities to mortgage bankers across the United States. Mortgage Banking activities primarily include fixed-term single-family, first-lien residential real estate loans. Through the TRS segment, the Bank facilitates the receipt and payment of federal and state tax refund products and offers a credit product through third-party tax preparers. The RPS segment offers a range of payments-related products and services to consumers.

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.

Republic Bancorp Inc has a Value Score of 71, which is considered to be undervalued.

Republic Bancorp Inc’s price-earnings ratio is 13.3 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 Republic Bancorp Inc less attractive for value investors.

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

You can read more about Republic 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.

Renasant Corp’s Value Grade

Value Grade:

Renasant Corporation owns and operates Renasant Bank. The Company owns and operates approximately 185 banking, lending, mortgage, and wealth management offices throughout the Southeast as well as offering factoring and asset-based lending on a nationwide basis. Its Community Banks segment delivers a complete range of banking and financial services to individuals and small to medium-sized businesses including checking and savings accounts, business and personal loans, asset-based lending, factoring, equipment leasing and treasury management services, as well as safe deposit and night depository facilities. Its Wealth Management segment, through the Trust division, offers a range of fiduciary services including the administration (as trustee or in other fiduciary or representative capacities) of benefit plans, management of trust accounts, inclusive of personal and corporate benefit accounts, and custodial accounts, as well as accounting and money management for trust accounts.

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.

Renasant Corp has a Value Score of 74, which is considered to be undervalued.

Renasant Corp’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 Renasant Corp less attractive for value investors.

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

You can read more about Renasant 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.

• Citizens Financial Services Inc stock has a Value Grade of B.
• First Capital Inc stock has a Value Grade of A.
• Metropolitan Bank Holding Corp stock has a Value Grade of A.
• Patriot National Bancorp Inc stock has a Value Grade of A.
• Republic Bancorp Inc stock has a Value Grade of B.
• Renasant 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 Tuesday, October 01
• Which Is a Better Investment, Merchants Bancorp or OFG Bancorp Stock?
• 3 Undervalued Banks Stocks for Monday, September 30
• Why Banco Bbva Argentina SA (ADR)’s (BBAR) Stock Is Down 5.04%

AAII Disclaimer

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