Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 7 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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7 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 7 undervalued stocks in the Banks industry for Tuesday, January 17, 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.

Grupo Aval Acciones y Valores SA - ADR’s Value Grade

Value Grade:

Grupo Aval Acciones y Valores SA is a Colombia-based holding company primarily engaged, through its subsidiaries, in the acquisition, purchase and sale of stocks, bonds and other securities of companies active in the financial sector. The Company provides a variety of financial services and products across the Colombian market, ranging from traditional banking services, such as loans and deposits to pension and severance fund management, as well as the provision of legal representation services. The Company owns such subsidiaries as Banco de Bogota SA, Banco Popular SA, among others. Additionally, through its indirect and direct investments in other companies, the Company is present in the activities of investment baking and investments in the real sector, as well as the administrator of pension and severance funds in Colombia.

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.

Grupo Aval Acciones y Valores SA - ADR has a Value Score of 96, which is considered to be undervalued.

When you look at Grupo Aval Acciones y Valores SA - ADR’s price-to-sales ratio at 0.74 compared to the industry median at 3.20, this company has a lower price relative to revenue compared to its peers. This could make Grupo Aval Acciones y Valores SA - ADR’s stock more attractive for value investors.

Grupo Aval Acciones y Valores SA - ADR’s price-earnings ratio is 5.25 compared to the industry median at 10.34. This means it has a lower share price relative to earnings compared to its peers. This could make Grupo Aval Acciones y Valores SA - ADR more attractive for value investors.

Now, let’s assess Grupo Aval Acciones y Valores SA - ADR’s EV/EBITDA ratio, also known as enterprise multiple. At 7.9, when compared to the industry median of 6.8, the company may be considered overvalued 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. Grupo Aval Acciones y Valores SA - ADR’s shareholder yield is higher than its industry median ratio of 3.17%. 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. Grupo Aval Acciones y Valores SA - ADR’s price-to-book ratio is lower than its industry median ratio of 1.17. This could make Grupo Aval Acciones y Valores SA - ADR more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Grupo Aval Acciones y Valores SA - ADR’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Grupo Aval Acciones y Valores SA - ADR’s price-to-free-cash-flow ratio is lower than its industry median ratio of 9.53. This could make Grupo Aval Acciones y Valores SA - ADR more attractive because the lower P/FCF ratio indicates that Grupo Aval Acciones y Valores SA - ADR 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.

Carver Bancorp Inc’s Value Grade

Value Grade:

Carver Bancorp, Inc. is the holding company for Carver Federal Savings Bank (Carver Federal), a federally chartered savings bank. The Company conducts business as a unitary savings and loan holding company, and the business of the Company consists of the operation of its subsidiary, Carver Federal. Carver Federal engages in a range of consumer and commercial banking services. It provides deposit products, including demand, savings and time deposits for consumers, businesses, and governmental and quasi-governmental agencies in its local market area within New York City. It offers other consumer and commercial banking products and services, such as debit cards, online banking, online bill pays and telephone banking. The Company also offers a suite of products and services for unbanked and underbanked consumers, branded as Carver Community Cash. It offers loan products covering a range of asset classes, including commercial and multifamily mortgages, and business loans.

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.

Carver Bancorp Inc has a Value Score of 68, which is considered to be undervalued.

Carver Bancorp Inc’s price-to-book ratio is higher than its peers. This could make Carver Bancorp Inc less attractive for value investors when compared to the industry median at 1.17.

You can read more about Carver 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.

FB Financial Corp’s Value Grade

Value Grade:

FB Financial Corporation is a financial holding company. The Company operates through its subsidiary, FirstBank (the Bank). Its Banking segment provides a range of deposit and lending products and services to corporate, commercial and consumer customers. Its Mortgage segment offers full-service conforming residential mortgage products, including conforming residential loans services through two delivery channels: retail and ConsumerDirect. This segment also includes the servicing of residential mortgage loans and the packaging and securitization of loans to governmental agencies. The Bank provides a suite of commercial and consumer banking services to clients in select markets in Tennessee, Alabama, Southern Kentucky, and North Georgia. It operates approximately 82 full-service branches serving the Tennessee Metropolitan Statistical Areas. It also provides banking services to approximately 16 community markets throughout Tennessee and North Georgia.

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.

FB Financial Corp has a Value Score of 65, which is considered to be undervalued.

FB Financial Corp’s price-earnings ratio is 13.2 compared to the industry median at 10.3. This means that it has a higher price relative to its earnings compared to its peers. This makes FB Financial Corp less attractive for value investors.

FB Financial Corp’s price-to-book ratio is lower than its peers. This could make FB Financial Corp more attractive for value investors when compared to the industry median at 1.17.

You can read more about FB Financial 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.

First Farmers & Merchants Corp’s Value Grade

Value Grade:

First Farmers and Merchants Corporation is a bank holding company whose principal activity is the ownership and management of its wholly owned subsidiary, First Farmers & Merchants Bank (the Bank). The Bank is engaged in providing personal banking, business banking, wealth management and business treasury management. Its personal banking provides retire and invest, credit cards, personal lending and online and mobile banking. Its business banking provides business retire and invest, business treasury management, business loans, business credit cards and business online and mobile banking. The Bank’s wealth management provides trust services and investment services. The Bank is also providing a range of banking and financial services, including lending, investing of funds, obtaining deposits, trust and wealth management operations, and other financing activities to individual and corporate customers in the Middle Tennessee area.

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 & Merchants Corp has a Value Score of 89, which is considered to be undervalued.

First Farmers & Merchants Corp’s price-earnings ratio is 7.0 compared to the industry median at 10.3. This means that it has a lower price relative to its earnings compared to its peers. This makes First Farmers & Merchants Corp more attractive for value investors.

First Farmers & Merchants Corp’s price-to-book ratio is higher than its peers. This could make First Farmers & Merchants Corp less attractive for value investors when compared to the industry median at 1.17.

You can read more about First Farmers & Merchants 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.

First Internet Bancorp’s Value Grade

Value Grade:

First Internet Bancorp is a bank holding company that conducts its business activities through its subsidiary, First Internet Bank of Indiana (the Bank). The Company offers a range of commercial, small business, consumer and municipal banking products and services. The Company conducts consumer and small business deposit operations primarily through digital channels on a nationwide basis. Its residential mortgage products are offered nationwide primarily through a digital direct-to-consumer platform. Its commercial banking products and services are delivered through a relationship banking model and include commercial real estate (CRE) banking, commercial and industrial (C&I;) banking, public finance, healthcare finance, small business lending and commercial deposits and treasury management. It also provides a range of public and municipal finance lending and leasing products to governmental entities throughout the United States.

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 95, which is considered to be undervalued.

First Internet Bancorp’s price-earnings ratio is 6.0 compared to the industry median at 10.3. This means that it has a lower price relative to its earnings compared to its peers. This makes First Internet Bancorp more 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 1.17.

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.

JPMorgan Chase & Co’s Value Grade

Value Grade:

JPMorgan Chase & Co. is a financial holding company engaged in investment banking, financial services and asset management. It operates in four segments, as well as a Corporate segment. The Company's segments are Consumer & Community Banking, Corporate & Investment Bank, Commercial Banking and Asset Management. The Consumer & Community Banking segment offers services to consumers and businesses through bank branches, automatic teller machines, online, mobile and telephone banking. The Corporate & Investment Bank segment, comprising Banking and Markets and Investor Services, offers investment banking, market-making, prime brokerage, and treasury and securities products and services to corporations, investors, financial institutions, and government and municipal entities. The Commercial Banking segment provides financial solutions, including lending, treasury services, investment banking and asset management. The Asset Management segment comprises investment and wealth management.

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.

JPMorgan Chase & Co has a Value Score of 68, which is considered to be undervalued.

JPMorgan Chase & Co’s price-earnings ratio is 12.1 compared to the industry median at 10.3. This means that it has a higher price relative to its earnings compared to its peers. This makes JPMorgan Chase & Co less attractive for value investors.

JPMorgan Chase & Co’s price-to-book ratio is lower than its peers. This could make JPMorgan Chase & Co more attractive for value investors when compared to the industry median at 1.17.

You can read more about JPMorgan Chase & Co’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.

Waterstone Financial Inc’s Value Grade

Value Grade:

Waterstone Financial, Inc. is a community bank. The Company subsidiary includes WaterStone Bank SSB (the Bank). The Bank’s principal lending activity is originating one- to four-family, multi-family residential real estate and commercial real estate loans for retention in its portfolio. It operates through two segments: community banking and mortgage banking. The community banking segment provides consumer and business banking products and services to customers primarily within South-eastern Wisconsin. Within this segment, it provides various products and services, including lending solutions, deposit and transactional solutions, investable funds solutions, and fixed and variable annuities, insurance as well as trust and investment management accounts. The mortgage banking segment provides residential mortgage loans for the primary purpose of sale on the secondary market. Mortgage banking products and services are provided by offices in 21 states with the ability to lend in 48 states.

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.

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

Waterstone Financial Inc’s price-earnings ratio is 12.9 compared to the industry median at 10.3. This means that it has a higher price relative to its earnings compared to its peers. This makes Waterstone Financial Inc less attractive for value investors.

Waterstone Financial Inc’s price-to-book ratio is higher than its peers. This could make Waterstone Financial Inc less attractive for value investors when compared to the industry median at 1.17.

You can read more about Waterstone Financial 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 7 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.

• Grupo Aval Acciones y Valores SA - ADR stock has a Value Grade of A.
• Carver Bancorp Inc stock has a Value Grade of B.
• FB Financial Corp stock has a Value Grade of B.
• First Farmers & Merchants Corp stock has a Value Grade of A.
• First Internet Bancorp stock has a Value Grade of A.
• JPMorgan Chase & Co stock has a Value Grade of B.
• Waterstone Financial Inc stock has a Value Grade of A.

Now that you have a bit more background about each of the 7 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.

• 7 Undervalued Banks Stocks for Tuesday, January 17
• Which Is a Better Investment, Associated Banc Corp or Eastern Bankshares Inc Stock?
• Which Is a Better Investment, Associated Banc Corp or First Financial Bankshares Inc Stock?
• Which Is a Better Investment, Banco Macro SA (ADR) or Washington Federal Inc. Stock?

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.