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 Friday, October 11, 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.

The Bank of Nova Scotia’s Value Grade

Value Grade:

The Bank of Nova Scotia provides various banking products and services in Canada, the United States, Mexico, Peru, Chile, Colombia, the Caribbean and Central America, and internationally. It operates through Canadian Banking, International Banking, Global Wealth Management, and Global Banking and Markets segments. The company offers financial advice and solutions, and banking products, including debit and credit cards, chequing and saving accounts, investments, mortgages, loans, and insurance to individuals; and retail automotive financing solutions. It also provides business banking solutions comprising lending, deposit, cash management, and trade finance solutions to small, medium, and large businesses. In addition, it provides wealth management advice and solutions, including online brokerage, mobile investment, full-service brokerage, trust, private banking, and private investment counsel services; and retail mutual funds, exchange traded funds, liquid alternatives, and institutional funds. The Bank of Nova Scotia was founded in 1832 and is headquartered in Toronto, Canada.

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.

The Bank of Nova Scotia has a Value Score of 92, which is considered to be undervalued.

When you look at The Bank of Nova Scotia’s price-to-sales ratio at 2.19 compared to the industry median at 2.80, this company has a lower price relative to revenue compared to its peers. This could make The Bank of Nova Scotia’s stock more attractive for value investors.

The Bank of Nova Scotia’s price-earnings ratio is 12.60 compared to the industry median at 11.80. This means it has a higher share price relative to earnings compared to its peers. This could make The Bank of Nova Scotia less attractive for value investors.

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. The Bank of Nova Scotia’s shareholder yield is higher than its industry median ratio of 3.10%. 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. The Bank of Nova Scotia’s price-to-book ratio is lower than its industry median ratio of 0.97. This could make The Bank of Nova Scotia more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at The Bank of Nova Scotia’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. The Bank of Nova Scotia’s price-to-free-cash-flow ratio is lower than its industry median ratio of 14.80. This could make The Bank of Nova Scotia more attractive because the lower P/FCF ratio indicates that The Bank of Nova Scotia 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 Financial Group, Inc.’s Value Grade

Value Grade:

Citizens Financial Group, Inc. operates as the bank holding company that provides retail and commercial banking products and services to individuals, small businesses, middle-market companies, corporations, and institutions in the United States. The company operates in two segments, Consumer Banking and Commercial Banking. The Consumer Banking segment offers deposit products, mortgage and home equity lending products, credit cards, business loans, wealth management, and investment services; and auto, education, and point-of-sale finance loans, as well as digital deposit products. This segment serves its customers through telephone service centers, as well as through its online and mobile platforms. The Commercial Banking segment provides various financial products and solutions, including lending and leasing, deposit and treasury management services, foreign exchange, and interest rate and commodity risk management solutions, as well as syndicated loans, corporate finance, mergers and acquisitions, and debt and equity capital markets services. This segment serves corporate banking, healthcare, technology, asset finance, franchise finance, leasing, asset-based lending, commercial real estate, mid-corporate, and private equity sponsor industries. The company was formerly known as RBS Citizens Financial Group, Inc. and changed its name to Citizens Financial Group, Inc. in April 2014. Citizens Financial Group, Inc. was founded in 1828 and is headquartered in Providence, Rhode Island.

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 Group, Inc. has a Value Score of 83, which is considered to be undervalued.

Citizens Financial Group, Inc.’s price-earnings ratio is 15.7 compared to the industry median at 11.8. This means that it has a higher price relative to its earnings compared to its peers. This makes Citizens Financial Group, Inc. less attractive for value investors.

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

You can read more about Citizens Financial Group, 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.

East West Bancorp, Inc.’s Value Grade

Value Grade:

East West Bancorp, Inc. operates as the bank holding company for East West Bank that provides a range of personal and commercial banking services to businesses and individuals in the United States. The company operates through three segments: Consumer and Business Banking, Commercial Banking, and Other. It accepts various deposit products, such as personal and business checking and savings accounts, money market, and time deposits. The company’s loan products include mortgage and home equity, commercial and residential real estate, working capital lines of credit, construction finance, trade finance, letters of credit, commercial business, affordable housing loans, asset-based lending, asset-backed finance, project finance, loan syndication, and equipment financing, as well as financing services for clients to facilitate their business transactions between the United States and Asia. It also provides various wealth management, treasury management, foreign exchange, and interest rate and commodity risk hedging services; and mobile and online banking services. The company was founded in 1973 and is headquartered in Pasadena, California.

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.

East West Bancorp, Inc. has a Value Score of 64, which is considered to be undervalued.

East West Bancorp, Inc.’s price-earnings ratio is 10.9 compared to the industry median at 11.8. This means that it has a lower price relative to its earnings compared to its peers. This makes East West Bancorp, Inc. more attractive for value investors.

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

You can read more about East West 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.

Pinnacle Bancshares, Inc.’s Value Grade

Value Grade:

Pinnacle Bancshares, Inc. operates as the bank holding company for Pinnacle Bank that provides various banking products and services. The company provides checking accounts, savings accounts, and demand and time deposits. It also offers personal lending for automobile, boat, jet ski, motor home, travel trailers, manufactured home, tractor, ATV, personal line of credit, and others; mortgage products, such as residential purchase and refinance, investment property, consumer construction, consumer 2nd mortgage, veterans administration loans, federal housing administration loans, land loans, home equity line of credit, and home improvement/renovation; commercial lending products, including purchase, construction, and refinance of residential rental property and commercial real estate, as well as residential rental property improvements, land acquisition, investment, and development; commercial construction; and SBA lending. In addition, the company provides digital banking, card, cash management, and merchant services. Pinnacle Bancshares, Inc. was incorporated in 1996 and is based in Jasper, Alabama.

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.

Pinnacle Bancshares, Inc. has a Value Score of 84, which is considered to be undervalued.

Pinnacle Bancshares, Inc.’s price-earnings ratio is 6.0 compared to the industry median at 11.8. This means that it has a lower price relative to its earnings compared to its peers. This makes Pinnacle Bancshares, Inc. more attractive for value investors.

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

You can read more about Pinnacle 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.

Third Coast Bancshares, Inc.’s Value Grade

Value Grade:

Third Coast Bancshares, Inc. operates as a bank holding company for Third Coast Bank, SSB that provides various commercial banking solutions to small and medium-sized businesses, and professionals. The company’s deposit products include checking, savings, individual retirement, and money market accounts, as well as certificates of deposit. It also offers commercial and industrial loans, equipment loans, working capital lines of credit, guaranteed loans, auto finance, letters of credit, commercial and residential real estate, and construction, development, and other loans. In addition, the company provides retail and commercial online banking platforms, mobile banking apps, mortgage, treasury management solutions, merchant card services, and customer digital solutions, as well as debit and credit cards. Third Coast Bancshares, Inc. was founded in 2008 and is headquartered in Humble, Texas.

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.

Third Coast Bancshares, Inc. has a Value Score of 65, which is considered to be undervalued.

Third Coast Bancshares, Inc.’s price-earnings ratio is 12.2 compared to the industry median at 11.8. This means that it has a higher price relative to its earnings compared to its peers. This makes Third Coast Bancshares, Inc. less attractive for value investors.

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

You can read more about Third Coast 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.

WesBanco, Inc.’s Value Grade

Value Grade:

WesBanco, Inc. operates as the bank holding company for WesBanco Bank, Inc. that provides retail banking, corporate banking, personal and corporate trust, brokerage, mortgage banking, and insurance services to individuals and businesses in the United States. The company operates through two segments, Community Banking, and Trust and Investment Services. It offers commercial demand, individual demand, and time deposit accounts; commercial, mortgage and individual installment loans; retail loans, such as residential real estate mortgage loans, home equity lines of credit, and loans for other consumer purposes; installment loans to finance the purchase of automobiles, trucks, motorcycles, boats, and other recreational vehicles, as well as home equity installment loans, unsecured home improvement loans, and revolving lines of credit; and various non-traditional offerings, such as insurance and securities brokerage services. The company also provides trust services; and various alternative investment products, including mutual funds and annuities. In addition, it acts as an agency that specializes in property, casualty, life, and title insurance, as well as benefit plan sales and administration to personal and commercial clients; provides broker dealer and discount brokerage services; holds investment securities and loans; and holds and leases commercial real estate properties, as well as acts as an investment adviser to a family of mutual funds. WesBanco, Inc. was founded in 1870 and is headquartered in Wheeling, West Virginia.

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.

WesBanco, Inc. has a Value Score of 69, which is considered to be undervalued.

WesBanco, Inc.’s price-earnings ratio is 13.8 compared to the industry median at 11.8. This means that it has a higher price relative to its earnings compared to its peers. This makes WesBanco, Inc. less attractive for value investors.

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

You can read more about WesBanco, 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.

• The Bank of Nova Scotia stock has a Value Grade of A.
• Citizens Financial Group, Inc. stock has a Value Grade of A.
• East West Bancorp, Inc. stock has a Value Grade of B.
• Pinnacle Bancshares, Inc. stock has a Value Grade of A.
• Third Coast Bancshares, Inc. stock has a Value Grade of B.
• WesBanco, 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 Friday, October 11
• 6 Undervalued Banks Stocks for Thursday, October 10
• 4 Undervalued Banks Stocks for Wednesday, October 09
• 7 Undervalued Banks Stocks for Tuesday, October 08

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.