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 Thursday, January 26, 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.

BankUnited Inc’s Value Grade

Value Grade:

BankUnited, Inc. is a bank holding company of BankUnited (the Bank). The Bank provides a range of commercial lending and both commercial and consumer deposit services through banking centers located in Florida and the New York metropolitan area. The Bank also provides commercial lending and deposit products through national platforms and consumer deposit products through an online channel. The Bank’s lending and leasing products include commercial loans, commercial real estate loans, residential mortgages and other consumer loans. It offers traditional deposit products, including commercial and consumer checking accounts, money market deposit accounts, savings accounts and certificates of deposit with a variety of terms and rates as well as a range of treasury, commercial payments and cash management services. Its primary banking markets are Florida and the Tri-State markets of New York, New Jersey and Connecticut, concentrated in the New York Metropolitan 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.

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

When you look at BankUnited Inc’s price-to-sales ratio at 2.23 compared to the industry median at 3.09, this company has a lower price relative to revenue compared to its peers. This could make BankUnited Inc’s stock more attractive for value investors.

BankUnited Inc’s price-earnings ratio is 9.77 compared to the industry median at 10.10. This means it has a lower share price relative to earnings compared to its peers. This could make BankUnited Inc more attractive for value investors.

Now, let’s assess BankUnited Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 5.9, when compared to the industry median of 6.9, 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. BankUnited Inc’s shareholder yield is higher than its industry median ratio of 3.25%. 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. BankUnited Inc’s price-to-book ratio is lower than its industry median ratio of 1.15. This could make BankUnited Inc more attractive to investors looking for a new addition to their portfolio.

Discover Financial Services’s Value Grade

Value Grade:

Discover Financial Services is a digital banking and payment services company. The Company is a bank holding company, as well as a financial holding company. Its segments include Digital Banking and Payment Services. Its Digital Banking segment includes consumer banking and lending products, specifically Discover-branded credit cards issued to individuals on the Discover Network and other consumer banking products and services, including private student loans, personal loans, home loans and deposit products. Its Payment Services segment includes the PULSE network (PULSE), Diners Club International (Diners Club) and its Network Partners business, which provides payment transaction processing and settlement services on the Discover Global Network. Its private student loans are primarily available to students attending eligible non-profit undergraduate and graduate schools. It also offers parent loans and certain post-graduate loans, including consolidation, bar study and residency 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.

Discover Financial Services has a Value Score of 79, which is considered to be undervalued.

Discover Financial Services’s price-earnings ratio is 7.4 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 Discover Financial Services more attractive for value investors.

Discover Financial Services’s price-to-book ratio is lower than its peers. This could make Discover Financial Services more attractive for value investors when compared to the industry median at 1.15.

You can read more about Discover Financial Services’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.

HarborOne Bancorp Inc’s Value Grade

Value Grade:

HarborOne Bancorp, Inc. is the holding company of HarborOne Bank (the Bank) and its subsidiaries. The Company operates through two segments: HarborOne Bank and HarborOne Mortgage. The HarborOne Bank segment consists primarily of interest earned on loans and investment securities and service charges on deposit accounts. The HarborOne Mortgage segment is comprised of interest earned on loans and fees received as a result of the residential mortgage origination, sale and servicing process. The residential real estate portfolio loans are originated by HarborOne Mortgage segment and purchased by the Bank. The Company provides a range of financial services to individuals and businesses through approximately 27 full-service branches in Massachusetts and Rhode Island, and commercial lending offices in each of Boston, Massachusetts and Providence, Rhode Island. HarborOne Mortgage maintains more than 30 offices in Massachusetts, Rhode Island, New Hampshire, and Maine.

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.

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

HarborOne Bancorp Inc’s price-earnings ratio is 13.8 compared to the industry median at 10.1. This means that it has a higher price relative to its earnings compared to its peers. This makes HarborOne Bancorp Inc less attractive for value investors.

HarborOne Bancorp Inc’s price-to-book ratio is higher than its peers. This could make HarborOne Bancorp Inc less attractive for value investors when compared to the industry median at 1.15.

You can read more about HarborOne 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.

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 71, which is considered to be undervalued.

JPMorgan Chase & Co’s price-earnings ratio is 11.5 compared to the industry median at 10.1. 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 1.15.

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.

Midwestone Financial Group Inc (IOWA)’s Value Grade

Value Grade:

MidWestOne Financial Group, Inc. is a bank holding company. The Company's principal business is to serve as the holding company for its wholly owned subsidiary, MidWestOne Bank (the Bank). The Bank is focused on delivering relationship-based business and personal banking products and services. The Bank provides commercial loans, real estate loans, agricultural loans, credit card loans, and consumer loans. The Bank also provides deposit products, including demand and interest checking accounts, savings accounts, money market accounts, and time deposits. In addition to its loan and deposit products, the Bank also provides products and services, including treasury management, Zelle, online and mobile banking, debit cards, automated teller machines (ATMs), and safe deposit boxes. The Bank also has a trust department, through which it offers services, including the administration of estates, personal trusts, and conservatorships and the management of real property.

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 (IOWA) has a Value Score of 87, which is considered to be undervalued.

Midwestone Financial Group Inc (IOWA)’s price-earnings ratio is 8.7 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 Midwestone Financial Group Inc (IOWA) more attractive for value investors.

Midwestone Financial Group Inc (IOWA)’s price-to-book ratio is higher than its peers. This could make Midwestone Financial Group Inc (IOWA) less attractive for value investors when compared to the industry median at 1.15.

You can read more about Midwestone Financial Group Inc (IOWA)’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.

Mission Valley Bancorp’s Value Grade

Value Grade:

Mission Valley Bancorp is a bank holding company. It has two wholly owned subsidiaries, Mission Valley Bank (the Bank) and Mission SBA Loan Servicing LLC (Mission SBA). The Bank is a full-service, independent, commercial bank specializing in the banking needs of small to medium businesses with full-service branches in the San Fernando and Santa Clarita Valleys. Mission SBA is a de novo SBA lender service provider (LSP) that provides SBA lending services to other financial institutions. The SBA lending services include underwriting, processing, closing, servicing, and referral/placement services. The Bank provides business solutions and personal solutions. The Bank's business solutions include business lending solutions, business checking choices, business online services, business mobile, business savings choices, and merchant bankcard solutions. The Bank's personal solutions include personal/small business mobile, personal online services, personal checking choices, 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.

Mission Valley Bancorp has a Value Score of 74, which is considered to be undervalued.

Mission Valley Bancorp’s price-earnings ratio is 9.9 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 Mission Valley Bancorp more attractive for value investors.

Mission Valley Bancorp’s price-to-book ratio is higher than its peers. This could make Mission Valley Bancorp less attractive for value investors when compared to the industry median at 1.15.

You can read more about Mission Valley 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.

West Bancorporation, Inc.’s Value Grade

Value Grade:

West Bancorporation, Inc. is a financial holding company. The Company owns West Bank (the Bank), which is a business-focused community bank. The Company operates in the markets, including central Iowa, which is generally the greater Des Moines metropolitan area; eastern Iowa, which includes the area surrounding Iowa City and Coralville, and southern Minnesota, which includes the cities of Rochester, Owatonna, Mankato and St. Cloud. The Bank offers a range of deposit services, including checking, savings and money market accounts and time certificates of deposit. The Bank also offers Internet, mobile banking and treasury management services, which help to meet the banking needs of its customers. It offers many types of credit to its customers, including commercial, real estate and consumer loans. It also offers trust services, including the administration of estates, conservatorships, personal trusts and agency accounts.

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.

West Bancorporation, Inc. has a Value Score of 71, which is considered to be undervalued.

West Bancorporation, Inc.’s price-earnings ratio is 7.7 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 West Bancorporation, Inc. more attractive for value investors.

West Bancorporation, Inc.’s price-to-book ratio is lower than its peers. This could make West Bancorporation, Inc. more attractive for value investors when compared to the industry median at 1.15.

You can read more about West Bancorporation, 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.

• BankUnited Inc stock has a Value Grade of A.
• Discover Financial Services stock has a Value Grade of B.
• HarborOne Bancorp Inc stock has a Value Grade of B.
• JPMorgan Chase & Co stock has a Value Grade of B.
• Midwestone Financial Group Inc (IOWA) stock has a Value Grade of A.
• Mission Valley Bancorp stock has a Value Grade of B.
• West Bancorporation, Inc. stock has a Value Grade of B.

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 Thursday, January 26
• Which Is a Better Investment, Ameris Bancorp or BankUnited Inc Stock?
• Which Is a Better Investment, Ameris Bancorp or East West Bancorp Inc Stock?
• Which Is a Better Investment, Ameris Bancorp or First Financial Bancorp Stock?

AAII Disclaimer

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