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 22, 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.

Commercial National Financial Corporation’s Value Grade

Value Grade:

Commercial National Financial Corporation operates as the holding company for Commercial Bank that provides various banking products and services to individuals, agricultural and commercial businesses, and light industries in Michigan. The company accepts various deposit products, including checking and savings accounts, individual retirement accounts, certificates of deposit, and health savings accounts. It offers personal loan products, such as automobile, recreational vehicle, all-terrain, boat and snow mobile loans, personal lines of credit, and unsecured term loans, as well as home equity loans and mortgage loans; and business loans, including secured lines of credit, business lines of credit, SBA loans, equipment lines of credit, real estate loans, vehicle loans, term loans, USDA loan programs, and capital access loan programs. In addition, the company provides treasury management services comprising merchant, automated clearing houses and remote deposit services; debit, credit, and ATM cards; and online services consisting of online bill pay, and mobile, online, and telephone banking. It provides its services through offices located in Barry, Gratiot, Ingham, Montcalm, and Ottawa counties in Michigan. The company was founded in 1893 and is headquartered in Ithaca, Michigan.

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.

Commercial National Financial Corporation has a Value Score of 93, which is considered to be undervalued.

When you look at Commercial National Financial Corporation’s price-to-sales ratio at 1.85 compared to the industry median at 2.87, this company has a lower price relative to revenue compared to its peers. This could make Commercial National Financial Corporation’s stock more attractive for value investors.

Commercial National Financial Corporation’s price-earnings ratio is 6.70 compared to the industry median at 12.00. This means it has a lower share price relative to earnings compared to its peers. This could make Commercial National Financial 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. Commercial National Financial Corporation’s shareholder yield is higher than its industry median ratio of 2.90%. 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. Commercial National Financial Corporation’s price-to-book ratio is lower than its industry median ratio of 0.99. This could make Commercial National Financial Corporation more attractive to investors looking for a new addition to their portfolio.

First Merchants Corporation’s Value Grade

Value Grade:

First Merchants Corporation operates as the financial holding company for First Merchants Bank that provides community banking services. The company offers a range of financial services, including time, savings, and demand deposits; and consumer, commercial, agri-business, public finance, and real estate mortgage loans. It also provides personal and corporate trust; brokerage and private wealth management; and letters of credit, repurchase agreements, and other corporate services. The company operates banking locations in Indiana, Illinois, Ohio, and Michigan counties. It also offers its services through electronic and mobile delivery channels. First Merchants Corporation was founded in 1893 and is headquartered in Muncie, Indiana.

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 Merchants Corporation has a Value Score of 75, which is considered to be undervalued.

First Merchants Corporation’s price-earnings ratio is 12.0 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 First Merchants Corporation fairly attractive for value investors.

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

You can read more about First Merchants Corporation’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.

Highlands Bankshares, Inc.’s Value Grade

Value Grade:

Highlands Bankshares, Inc. operates as the bank holding company for The Grant County Bank and Capon Valley Bank that provide various banking products and services for individuals and businesses. The company accepts checking, saving, club accounts, money market, and individual retirement accounts; and insured cash sweep and CDARS, as well as certificates of deposit. It also offers personal and business loans, such as home mortgage and equity, land and lot, mobile home, auto, personal and business term, agriculture, equipment, and commercial real estate loans, as well as business lines of credit. In addition, the company provides investment checking, debit and credit cards, kasasa protect, automatic teller machines, business online banking and bill-pay, mobile and telephone banking, direct deposits, merchant cards, remote deposit capture, bank-by-mail, certified and cashier's checks, foreign currency exchange, safe deposit box, and money wire transfer services. Further, it offers sells life and accident coverage insurance products. The company was incorporated in 1984 and is based in Petersburg, 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.

Highlands Bankshares, Inc. has a Value Score of 75, which is considered to be undervalued.

Highlands Bankshares, Inc.’s price-earnings ratio is 11.5 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 Highlands Bankshares, Inc. more attractive for value investors.

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

You can read more about Highlands 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.

First Internet Bancorp’s Value Grade

Value Grade:

First Internet Bancorp operates as the bank holding company for First Internet Bank of Indiana that provides commercial, small business, consumer, and municipal banking products and services to individuals and commercial customers in the United States. The company accepts non-interest bearing and interest-bearing demand deposit, commercial deposit, savings, money market, and Banking-as-a-Service brokered deposit accounts, as well as certificates of deposit. It also offers commercial and industrial, owner-occupied and investor commercial real estate, construction, residential mortgage, home equity, line of credit and home improvement, small installment, term, and other consumer loans, as well as single tenant lease financing, and public and healthcare finance; franchise finance; and small business lending. In addition, the company is involved in the purchase, manage, service, and safekeeping of municipal securities; and provision of public and municipal lending and leasing products to government entities. Further, the company offers corporate credit card and treasury management services. First Internet Bancorp was founded in 1998 and is headquartered in Fishers, Indiana.

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 Internet Bancorp has a Value Score of 72, which is considered to be undervalued.

First Internet Bancorp’s price-earnings ratio is 17.1 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 First Internet Bancorp less attractive for value investors.

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

You can read more about First Internet 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.

Orrstown Financial Services, Inc.’s Value Grade

Value Grade:

Orrstown Financial Services, Inc. operates as the financial holding company for Orrstown Bank that provides commercial banking and financial advisory services to retail, commercial, non-profit, and government clients in the United States. It accepts various deposits, including checking, savings, time, demand, and money market deposits, as well as certificates of deposit. The company also offers commercial loans, such as commercial real estate, equipment, construction, working capital, and other commercial purpose loans, as well as industrial loans; consumer loans, such as home equity and other consumer loans, as well as home equity lines of credit; residential mortgage loans; acquisition and development loans; municipal loans; and installment and other loans. In addition, it provides renders services as trustee, executor, administrator, guardian, managing agent, custodian, and investment advisor, as well as other fiduciary services under the Orrstown Financial Advisors name; and retail brokerage services through a third-party broker/dealer arrangement. Further, the company offers fiduciary, investment advisory, insurance, and brokerage services. Orrstown Financial Services, Inc. was founded in 1919 and is headquartered in Shippensburg, 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.

Orrstown Financial Services, Inc. has a Value Score of 65, which is considered to be undervalued.

Orrstown Financial Services, Inc.’s price-earnings ratio is 11.5 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 Orrstown Financial Services, Inc. more attractive for value investors.

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

You can read more about Orrstown Financial Services, 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.

Sumitomo Mitsui Financial Group, Inc.’s Value Grade

Value Grade:

Sumitomo Mitsui Financial Group, Inc., together with its subsidiaries, provides banking, leasing, securities, consumer finance, and other services in Japan, the Americas, Europe, the Middle East, Asia, and Oceania. It operates through Wholesale Business Unit, Retail Business Unit, Global Business Unit, and Global Markets Business Unit segments. The Wholesale Business Unit segment offers bilateral loans, syndicated loans, commitment lines, structured finance, project finance, and nonrecourse loans; deposits and investment trusts; risk hedging services, including forward exchange contracts and derivatives; stand-by credit, performance bond and credit guarantee services; remittance, cash management, trade finance, and supply chain finance services; merger and acquisition, and other advisory services; digital services; and equipment, operating and leveraged leasing services. The Retail Business Unit segment provides wealth management services, such as time deposits and foreign currency deposits, investment trusts, equities, bonds, insurance products, and trust services; credit card, installment, and transaction services; and consumer finance and housing loans. The Global Business Unit segment offers loans, deposits, clearing services, trade finance, project finance, loan syndication, derivatives, and global cash management services; equity and fixed income sales and trading, and underwriting services; and construction machinery, transportation equipment, industrial machinery, medical equipment, and other leasing services. The Global Markets Business Unit segment provides asset liability management and portfolio management, foreign currency funding, and sales and trading services. The company offers system development, data processing, management consulting, economic research, and asset management services. Sumitomo Mitsui Financial Group, Inc. was incorporated in 2002 and is headquartered in Tokyo, Japan.

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.

Sumitomo Mitsui Financial Group, Inc. has a Value Score of 100, which is considered to be undervalued.

Sumitomo Mitsui Financial Group, Inc.’s price-earnings ratio is 8.2 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 Sumitomo Mitsui Financial Group, Inc. more attractive for value investors.

You can read more about Sumitomo Mitsui 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.

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.

• Commercial National Financial Corporation stock has a Value Grade of A.
• First Merchants Corporation stock has a Value Grade of B.
• Highlands Bankshares, Inc. stock has a Value Grade of B.
• First Internet Bancorp stock has a Value Grade of B.
• Orrstown Financial Services, Inc. stock has a Value Grade of B.
• Sumitomo Mitsui Financial Group, Inc. stock has a Value Grade of A.

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.

• 4 Undervalued Banks Stocks for Tuesday, October 22
• 6 Undervalued Banks Stocks for Monday, October 21
• 6 Undervalued Banks Stocks for Friday, October 18
• 3 Undervalued Banks Stocks for Thursday, October 17

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.