Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 5 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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5 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 5 undervalued stocks in the Banks industry for Monday, October 14, 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.

ACNB Corporation’s Value Grade

Value Grade:

ACNB Corporation, a financial holding company, offers banking, insurance, and financial services to individual, business, and government customers in the United States. The company provides checking, savings, and money market deposit accounts, as well as time deposits and debit cards. It also offers commercial lending products, such as commercial mortgages, real estate development and construction loans, accounts receivable and inventory financing, and agricultural and governmental loans; consumer lending products, including home equity loans and lines of credit, automobile and recreational vehicle loans, manufactured housing loans, and personal lines of credit; and mortgage lending programs include personal residential mortgages, and residential construction and investment mortgage loans. In addition, the company provides other services that are related to testamentary trusts, life insurance trusts, charitable remainder trusts, guardianships, powers of attorney, custodial accounts, and investment management and advisory accounts; and retail brokerage services. Further, it acts as a trustee to invest in, protect, manage, and distribute financial assets. Additionally, the company offers property and casualty, health, life, and disability insurance products to commercial and personal clients; and online, telephone, and mobile banking, as well as automated teller machine services. ACNB Corporation was founded in 1857 and is headquartered in Gettysburg, Pennsylvania.

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.

ACNB Corporation has a Value Score of 65, which is considered to be undervalued.

When you look at ACNB Corporation’s price-to-sales ratio at 3.39 compared to the industry median at 2.86, this company has a higher price relative to revenue compared to its peers. This could make ACNB Corporation’s stock less attractive for value investors.

ACNB Corporation’s price-earnings ratio is 11.60 compared to the industry median at 12.05. This means it has a lower share price relative to earnings compared to its peers. This could make ACNB Corporation more 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. ACNB Corporation’s shareholder yield is higher 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. ACNB Corporation’s price-to-book ratio is higher than its industry median ratio of 0.98. This could make ACNB Corporation less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at ACNB Corporation’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. ACNB Corporation’s price-to-free-cash-flow ratio is lower than its industry median ratio of 15.20. This could make ACNB Corporation more attractive because the lower P/FCF ratio indicates that ACNB Corporation 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.

Cashmere Valley Bank’s Value Grade

Value Grade:

Cashmere Valley Bank, a state chartered bank, provides banking products and services to small and middle-market businesses, and retail customers. It offers checking and savings accounts; personal, auto, boat, RV, and home equity loans, as well as mortgages; business loans comprising commercial real estate loans, commercial loans, operating lines of credit, and small business administration loans; credit cards; and equipment financing, wealth management, payment processing/merchant, and treasury services. The company also provides banking and financing solutions for local municipalities, including banking services, privately-placed bonds and notes, municipal credit cards, and interim-financings in connection with rural development projects. In addition, it offers personal and commercial lines of insurance, such as property, casualty, life, and health insurance products; and telephone, mobile, and online banking services, as well as online cash management and bill payment services. Cashmere Valley Bank was incorporated in 1932 and is based in Cashmere, Washington.

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.

Cashmere Valley Bank has a Value Score of 77, which is considered to be undervalued.

Cashmere Valley Bank’s price-earnings ratio is 7.6 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 Cashmere Valley Bank more attractive for value investors.

Cashmere Valley Bank’s price-to-book ratio is lower than its peers. This could make Cashmere Valley Bank more attractive for value investors when compared to the industry median at 0.98.

You can read more about Cashmere Valley 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.

First Northwest Bancorp’s Value Grade

Value Grade:

First Northwest Bancorp operates as a bank holding company for First Fed Bank that provides commercial and consumer banking services to individuals, businesses, and nonprofit organizations in western Washington, the United States. The company accepts various deposit instruments, including checking, money market deposit, savings, and transaction accounts, as well as certificates of deposit. It also originates one- to four-family mortgage loans, commercial and multi-family real estate loans, construction and land loans, and commercial business loans, as well as consumer loans primarily consisting of automobile loans, and home-equity loans and lines of credit. First Northwest Bancorp operates branch offices in Clallam, Jefferson, King, Kitsap, and Whatcom Counties, Washington. First Northwest Bancorp was founded in 1923 and is based in Port Angeles, Washington.

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 90, 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 0.98.

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.

Harford Bank’s Value Grade

Value Grade:

Harford Bank offers commercial and retail banking products and services for individuals, businesses, and governmental units in Harford County, Maryland, Cecil County, and neighboring counties. It provides various deposit services, including checking, savings, money market, certificates of deposit, and individual retirement accounts. The company also offers various commercial loans, which include secured and unsecured loans for working capital, business expansion loans, and equipment and machinery purchase loans, as well as commercial mortgages secured by real estate, real estate construction loans, and real estate acquisition loans. In addition, it provides consumer loans, such as secured and unsecured loans for financing automobiles, boats, mobile homes, education, bill consolidation, and home improvements. Further, the company offers various other banking services, including mobile banking, automated teller machine, online banking with bill payment, cash management, commercial account remote deposit capture, safe deposit boxes, direct deposit of payroll and social security checks, and ACH origination services, as well as debit, gift, and credit cards. Harford Bank was formerly known as Harford National Bank and changed its name to Harford Bank in July 2001. The company was founded in 1964 and is based in Aberdeen, Maryland.

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 86, which is considered to be undervalued.

Harford Bank’s price-earnings ratio is 8.4 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 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 0.98.

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.

River City Bank’s Value Grade

Value Grade:

River City Bank provides various banking services in El Dorado, Placer, Sacramento, and Yolo, California. It offers checking, savings, and term certificate accounts. The company also provides consumer, term, commercial real estate, commercial, agriculture, and residential mortgage loans; and home equity lines of credit, revolving lines of credit, non-revolving lines of credit, and letters of credit. In addition, it offers cash management services; lockbox, clean energy, and premier banking services; debit and credit cards; and online and mobile banking services. The company services agribusiness, construction, healthcare, manufacturing and distribution, nonprofits, professional services, property management, and representative payee industries. River City Bank was founded in 1973 and is headquartered in Sacramento, 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.

River City Bank has a Value Score of 91, which is considered to be undervalued.

River City Bank’s price-earnings ratio is 6.8 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 River City Bank more attractive for value investors.

River City Bank’s price-to-book ratio is higher than its peers. This could make River City Bank less attractive for value investors when compared to the industry median at 0.98.

You can read more about River City 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 5 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.

• ACNB Corporation stock has a Value Grade of B.
• Cashmere Valley Bank stock has a Value Grade of B.
• First Northwest Bancorp stock has a Value Grade of A.
• Harford Bank stock has a Value Grade of A.
• River City Bank stock has a Value Grade of A.

Now that you have a bit more background about each of the 5 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.

• 5 Undervalued Banks Stocks for Monday, October 14
• 6 Undervalued Banks Stocks for Friday, October 11
• 6 Undervalued Banks Stocks for Thursday, October 10
• 4 Undervalued Banks Stocks for Wednesday, October 09

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.