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.

Click the button below to learn more about A+ Investor and subscribe today.

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 Wednesday, October 23, 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.

Enterprise Bancorp, Inc.’s Value Grade

Value Grade:

Enterprise Bancorp, Inc. operates as the holding company for Enterprise Bank and Trust Company that engages in the provision of commercial banking products and services. It offers commercial and retail deposit products, including checking accounts, limited-transactional savings and money market accounts, commercial sweep products, and term certificates of deposit. The company also provides commercial real estate, commercial and industrial, commercial construction, residential, and consumer loans, as well as home equity loans and lines of credit. In addition, the company offers cash management services; wealth advisory and management services that include customized investment management and trust services to individuals, family groups, commercial businesses, trusts, foundations, non-profit organizations, and endowments; brokerage and management services to individual investors; insurance services; and online and mobile banking services. The company was founded in 1989 and is headquartered in Lowell, Massachusetts.

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.

Enterprise Bancorp, Inc. has a Value Score of 75, which is considered to be undervalued.

When you look at Enterprise Bancorp, Inc.’s price-to-sales ratio at 2.44 compared to the industry median at 2.88, this company has a lower price relative to revenue compared to its peers. This could make Enterprise Bancorp, Inc.’s stock more attractive for value investors.

Enterprise Bancorp, Inc.’s price-earnings ratio is 11.10 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 Enterprise Bancorp, Inc. 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. Enterprise Bancorp, Inc.’s shareholder yield is lower 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. Enterprise Bancorp, Inc.’s price-to-book ratio is higher than its industry median ratio of 1.00. This could make Enterprise Bancorp, Inc. less attractive to investors looking for a new addition to their portfolio.

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

Value Grade:

First Farmers Financial Corporation operates as the financial holding company for First Farmers Bank & Trust that provides banking products and services to individuals, families, and businesses. The company offers checking and savings accounts, health savings accounts, youth accounts, business accounts, deposit and government accounts, certificates of deposit, and individual retirement accounts, as well as account management services; and mortgages and construction loans, first time home buyers loan, home equity loans, auto loans, collateral loans, and debit and credit cards. It also provides lines of credit, term loans, real estate financing and construction loan, equipment financing, enhancement loans, letters of credit, inventory loans, livestock lending, and vehicle financing, as well as leasing, and mobile and online banking services. The company has offices throughout Carroll, Cass, Clay, Grant, Hamilton, Howard, Huntington, Madison, Marshall, Miami, Starke, Sullivan, Tippecanoe, Tipton, Vigo, and Wabash counties in Indiana; and offices in Coles, Edgar, and Vermilion counties in Illinois. First Farmers Financial Corporation was founded in 1885 and is headquartered in Converse, 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 Farmers Financial Corporation has a Value Score of 65, which is considered to be undervalued.

First Farmers Financial Corporation’s price-earnings ratio is 9.9 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 Farmers Financial Corporation more attractive for value investors.

You can read more about First Farmers Financial 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.

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 1.00.

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.

MidWestOne Financial Group, Inc.’s Value Grade

Value Grade:

MidWestOne Financial Group, Inc. operates as the bank holding company for MidWestOne Bank that provides commercial and retail banking products and services to individuals, businesses, governmental units, and institutional customers. It offers range of deposit products, including noninterest bearing and interest bearing demand deposits, savings, money market, and time deposits accounts. The company also provides commercial, real estate, agricultural, credit card, and consumer loans; and financing arrangements, such as brokered deposits, term debt, subordinated debt, and equity. In addition, it offers trust and investment services comprising administering estates, trusts, and conservatorships; property and farm management, investment advisory, retail securities brokerage, financial planning, and custodial services; and licensed brokers services. Further, the company provides online and mobile banking, debit cards, automated teller machines, and safe deposit boxes. MidWestOne Financial Group, Inc. was founded in 1934 and is headquartered in Iowa City, Iowa.

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.

MidWestOne Financial Group, Inc. has a Value Score of 72, which is considered to be undervalued.

MidWestOne Financial Group, Inc.’s price-earnings ratio is 14.8 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 MidWestOne Financial Group, Inc. less attractive for value investors.

MidWestOne Financial Group, Inc.’s price-to-book ratio is higher than its peers. This could make MidWestOne Financial Group, Inc. less attractive for value investors when compared to the industry median at 1.00.

You can read more about MidWestOne 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.

Peoples Bancorp Inc.’s Value Grade

Value Grade:

Peoples Bancorp Inc. operates as the holding company for Peoples Bank that provides commercial and consumer banking products and services. The company accepts various deposit products, including demand deposit accounts, savings accounts, money market accounts, certificates of deposit, and governmental deposits; and provides commercial and industrial, commercial real estate, construction, finance, residential real estate, and consumer indirect and direct loans, as well as home equity lines of credit and overdrafts. It also offers debit and automated teller machine (ATM) cards; safe deposit rental facilities; money orders and cashier’s checks; and telephone, mobile, and online banking services. In addition, the company provides various life, health, and property and casualty insurance products; third-party insurance administration; interactive teller machines; insurance premium financing; check deposit and alert notification; commercial and technology equipment leasing; fiduciary and trust; underwriting, origination, and servicing of equipment leases, and equipment financing agreements; and asset management and administration services, as well as employee benefit, retirement, and health care plan administration services. Further, it offers brokerage services through an unaffiliated registered broker-dealers; insurance premium finance lending and leasing; and credit cards to individuals and businesses, as well as provides merchant credit card transaction processing, and person-to-person payment processing services. Peoples Bancorp Inc. was founded in 1902 and is headquartered in Marietta, Ohio.

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.

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

Peoples Bancorp Inc.’s price-earnings ratio is 8.7 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 Peoples Bancorp Inc. more attractive for value investors.

Peoples Bancorp Inc.’s price-to-book ratio is lower than its peers. This could make Peoples Bancorp Inc. fairly attractive for value investors when compared to the industry median at 1.00.

You can read more about Peoples 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.

Banco Santander, S.A.’s Value Grade

Value Grade:

Banco Santander, S.A. provides various financial services worldwide. The company operates through Retail Banking, Santander Corporate & Investment Banking, Wealth Management & Insurance, and PagoNxt segments. It offers demand and time deposits, mutual funds, and current and savings accounts; mortgages, consumer finance, loans, and various financing solutions; and project finance, debt capital markets, global transaction banking, and corporate finance services. The company also provides asset management and private banking services; and insurance products. In addition, it offers corporate and investment banking services, and digital payment solutions. Further, it offers online banking and financial services to retail, business, institutional, corporate, private banking and university customers and clients. The company was formerly known as Banco Santander Central Hispano SA and changed its name to Banco Santander, S.A. in February 2007. Banco Santander, S.A. was founded in 1856 and is headquartered in Madrid, Spain.

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.

Banco Santander, S.A. has a Value Score of 96, which is considered to be undervalued.

Banco Santander, S.A.’s price-earnings ratio is 6.6 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 Banco Santander, S.A. more attractive for value investors.

Banco Santander, S.A.’s price-to-book ratio is higher than its peers. This could make Banco Santander, S.A. less attractive for value investors when compared to the industry median at 1.00.

You can read more about Banco Santander, S.A.’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.

• Enterprise Bancorp, Inc. stock has a Value Grade of B.
• First Farmers Financial Corporation stock has a Value Grade of B.
• First Merchants Corporation stock has a Value Grade of B.
• MidWestOne Financial Group, Inc. stock has a Value Grade of B.
• Peoples Bancorp Inc. stock has a Value Grade of A.
• Banco Santander, S.A. 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.

• 6 Undervalued Banks Stocks for Wednesday, October 23
• 4 Undervalued Banks Stocks for Tuesday, October 22
• 6 Undervalued Banks Stocks for Monday, October 21
• 6 Undervalued Banks Stocks for Friday, October 18

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.