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, January 06, 2023. 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.

C&F; Financial Corp’s Value Grade

Value Grade:

C&F; Financial Corporation is a bank holding company, which operates through, Citizens and Farmers Bank (the Bank). The Bank is an independent commercial bank, which provide a range of banking services to individuals and businesses through its main office in West Point, Virginia, and approximately 30 Virginia branches. These services include various types of checking and savings deposit accounts, as well as business, real estate, development, mortgage, home equity and installment loans. The Bank also offers automatic teller machines, Internet and mobile banking, peer-to-peer payment capabilities, and debit cards, as well as safe deposit box rentals, notary public, electronic transfer and other customary bank services to its customers. The Company has three segments. Community banking segment operates through C&F; Bank and C&F; Wealth Management Corporation. Mortgage banking segment operates through C&F; Mortgage Corporation. Consumer finance segment operates through C&F; Finance Company.

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.

C&F; Financial Corp has a Value Score of 88, which is considered to be undervalued.

When you look at C&F; Financial Corp’s price-to-sales ratio at 2.08 compared to the industry median at 3.12, this company has a lower price relative to revenue compared to its peers. This could make C&F; Financial Corp’s stock more attractive for value investors.

C&F; Financial Corp’s price-earnings ratio is 8.11 compared to the industry median at 10.09. This means it has a lower share price relative to earnings compared to its peers. This could make C&F; Financial Corp more attractive for value investors.

Now, let’s assess C&F; Financial Corp’s EV/EBITDA ratio, also known as enterprise multiple. At 5.8, when compared to the industry median of 6.8, the company may be considered undervalued 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. C&F; Financial Corp’s shareholder yield is higher than its industry median ratio of 3.21%. 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. C&F; Financial Corp’s price-to-book ratio is lower than its industry median ratio of 1.13. This could make C&F; Financial Corp more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at C&F; Financial Corp’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. C&F; Financial Corp’s price-to-free-cash-flow ratio is lower than its industry median ratio of 9.27. This could make C&F; Financial Corp more attractive because the lower P/FCF ratio indicates that C&F; Financial Corp 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 United Corp’s Value Grade

Value Grade:

First United Corporation is a bank holding company. The Company's business is serving as the parent company of First United Bank & Trust (the Bank), First United Statutory Trust I, and First United Statutory Trust II. The Bank offers a range of services, such as checking, savings, money market deposit accounts, and certificates of deposit, business loans, personal loans, mortgage loans, lines of credit, and consumer-oriented retirement accounts including individual retirement accounts (IRAs) and employee benefit accounts. In addition, the Bank provides full brokerage services through a networking arrangement with Cetera Investment Services, LLC., a full-service broker-dealer. The Bank also provides safe deposit and night depository facilities, insurance products and trust services. The Bank operates approximately 26 banking offices, one customer care center and 34 Automated Teller Machines (ATMs) in Allegany County, Frederick County, Garrett County, 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 United Corp has a Value Score of 91, which is considered to be undervalued.

First United Corp’s price-earnings ratio is 4.9 compared to the industry median at 10.1. This means that it has a lower price relative to its earnings compared to its peers. This makes First United Corp more attractive for value investors.

First United Corp’s price-to-book ratio is higher than its peers. This could make First United Corp less attractive for value investors when compared to the industry median at 1.13.

You can read more about First United 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.

Kish Bancorp Inc’s Value Grade

Value Grade:

Kish Bancorp Inc. is a diversified financial services company. The Company’s principal activity is the ownership and management of its subsidiaries, Kish Bank (the Bank), Kish Travel Services, Inc. and the Bank’s subsidiaries, Tri-Valley Properties, LLC, Kish Agency, Inc. and Kish Equities, LLC. The Company generates commercial and industrial, agricultural, commercial mortgage, residential real estate, and consumer loans and deposit services to its customers located primarily in central Pennsylvania and the surrounding areas. The Bank provides full banking services. Kish Agency, Inc. provides insurance products and services. Kish Travel Services, Inc. provides travel services to its customers. Kish Equities, LLC holds investments in equity securities. The Company’s products and services include personal checking accounts, personal savings accounts, trust and estate services, financial solutions, business loan and credits, business financial solutions, commercial insurance, and other.

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.

Kish Bancorp Inc has a Value Score of 80, which is considered to be undervalued.

Kish Bancorp Inc’s price-earnings ratio is 7.6 compared to the industry median at 10.1. This means that it has a lower price relative to its earnings compared to its peers. This makes Kish Bancorp Inc more attractive for value investors.

Kish Bancorp Inc’s price-to-book ratio is lower than its peers. This could make Kish Bancorp Inc more attractive for value investors when compared to the industry median at 1.13.

You can read more about Kish 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.

Nedbank Group Ltd. (ADR)’s Value Grade

Value Grade:

Nedbank Group Limited is a digital financial services provider. The Company's principal banking subsidiary is Nedbank Limited. It offers wholesale and retail banking, as well as insurance, asset management and wealth management services and solutions. The Company offers the solutions through its frontline clusters; Nedbank Corporate and Investment Banking, which includes investment banking, global markets and treasury, commercial property finance, deposit-taking and transactional banking; Nedbank Retail and Business Banking, which includes transactional banking, card and payment solutions, lending and deposit-taking and investment products; Nedbank Wealth, which includes high-net-worth banking, wealth management, asset management and insurance, and Nedbank Africa Regions, which includes transactional banking, lending, deposit-taking and card products, and wealth management. The Company’s primary market is South Africa and it also operates in five countries outside South Africa.

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.

Nedbank Group Ltd. (ADR) has a Value Score of 86, which is considered to be undervalued.

Nedbank Group Ltd. (ADR)’s price-earnings ratio is 8.1 compared to the industry median at 10.1. This means that it has a lower price relative to its earnings compared to its peers. This makes Nedbank Group Ltd. (ADR) more attractive for value investors.

Nedbank Group Ltd. (ADR)’s price-to-book ratio is higher than its peers. This could make Nedbank Group Ltd. (ADR) less attractive for value investors when compared to the industry median at 1.13.

You can read more about Nedbank Group Ltd. (ADR)’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.

Parke Bancorp, Inc.’s Value Grade

Value Grade:

Parke Bancorp, Inc. is a bank holding company of Parke Bank (the Bank). The Company, through its wholly owned subsidiary, provides personal and business financial services to individuals and small to mid-sized businesses. It offers a range of loan products, deposits services and other financial products through its retail branches and other channels to its customers. Its lending businesses consist of commercial real estate lending, residential real estate lending and construction lending. It also offers a range of commercial and industry loan, and consumer loan products to its customers. It funds its lending business primarily with deposits generated through retail deposits and commercial relationships. Its deposit products include checking, savings, money market deposits, time deposits and other traditional deposit services. In addition to traditional products and services, it offers contemporary products and services, such as debit cards, Internet banking and online bill payment.

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.

Parke Bancorp, Inc. has a Value Score of 86, which is considered to be undervalued.

Parke Bancorp, Inc.’s price-earnings ratio is 6.0 compared to the industry median at 10.1. This means that it has a lower price relative to its earnings compared to its peers. This makes Parke Bancorp, Inc. more attractive for value investors.

Parke Bancorp, Inc.’s price-to-book ratio is higher than its peers. This could make Parke Bancorp, Inc. less attractive for value investors when compared to the industry median at 1.13.

You can read more about Parke 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.

Touchstone Bank’s Value Grade

Value Grade:

Touchstone Bank (the Bank) is a local community bank. The Bank provides depository and lending services to customers primarily within the counties of Dinwiddie, Chesterfield and Prince George and the cities of Colonial Heights, Hopewell and Petersburg. The Bank offers a range of services, including personal, business, loans, services and tools, and wealth management. The Bank's personal and business services include checking account, savings account, loans and credit card services. The Bank's services and tools include account services, treasury services and various tools. The Bank provides investment, and insurance products and services through its subsidiary, Infinex Investments, Inc. The Bank also provides networking solutions to Virginia community banks through its subsidiary, McKenney Group, LLC. The Bank has approximately 10 branches serving Southern and Central Virginia and two branches and a loan center serving Northern North Carolina.

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.

Touchstone Bank has a Value Score of 90, which is considered to be undervalued.

Touchstone Bank’s price-earnings ratio is 7.8 compared to the industry median at 10.1. This means that it has a lower price relative to its earnings compared to its peers. This makes Touchstone Bank more attractive for value investors.

Touchstone Bank’s price-to-book ratio is higher than its peers. This could make Touchstone Bank less attractive for value investors when compared to the industry median at 1.13.

You can read more about Touchstone 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 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.

• C&F; Financial Corp stock has a Value Grade of A.
• First United Corp stock has a Value Grade of A.
• Kish Bancorp Inc stock has a Value Grade of B.
• Nedbank Group Ltd. (ADR) stock has a Value Grade of A.
• Parke Bancorp, Inc. stock has a Value Grade of A.
• Touchstone Bank 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 Friday, January 06
• Which Is a Better Investment, Banco Bradesco SA (ADR) or Citizens Financial Group Inc Stock?
• Which Is a Better Investment, Citizens Financial Group Inc or Nu Holdings Ltd Stock?
• Which Is a Better Investment, Citizens Financial Group Inc or Regions Financial Corp Stock?

AAII Disclaimer

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