Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 5 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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5 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 5 undervalued stocks in the Banks industry for Friday, March 03, 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.

Cadence Bank’s Value Grade

Value Grade:

Cadence Bank (the Bank) is a regional banking franchise with approximately 400 branch locations across the South and Texas. The Bank provides consumers, businesses, and corporations with a range of banking and financial solutions. The Bank's services and products include consumer banking, consumer loans, mortgages, home equity lines and loans, credit cards, commercial and business banking, treasury management, specialized lending, asset-based lending, commercial real estate, equipment financing, correspondent banking, small business administration (SBA) lending, foreign exchange, wealth management, investment and trust services, financial planning, retirement plan management, and personal and business insurance. The Bank offers baking solution in checking accounts, savings accounts, mortgages, investment management, credit cards, online and mobile banking, debit cards, treasury management, wealth management, trusts, business loans, business online banking, and merchant services.

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.

Cadence Bank has a Value Score of 63, which is considered to be undervalued.

When you look at Cadence Bank’s price-to-sales ratio at 3.01 compared to the industry median at 2.94, this company has a higher price relative to revenue compared to its peers. This could make Cadence Bank’s stock less attractive for value investors.

Cadence Bank’s price-earnings ratio is 10.46 compared to the industry median at 9.99. This means it has a higher share price relative to earnings compared to its peers. This could make Cadence Bank less attractive for value investors.

Now, let’s assess Cadence Bank’s EV/EBITDA ratio, also known as enterprise multiple. At 5.2, when compared to the industry median of 7.2, 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. Cadence Bank’s shareholder yield is lower than its industry median ratio of 3.26%. 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. Cadence Bank’s price-to-book ratio is higher than its industry median ratio of 1.16. This could make Cadence Bank less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Cadence Bank’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Cadence Bank’s price-to-free-cash-flow ratio is lower than its industry median ratio of 9.86. This could make Cadence Bank more attractive because the lower P/FCF ratio indicates that Cadence Bank 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 Mid Bancshares Inc’s Value Grade

Value Grade:

First Mid Bancshares, Inc. (First Mid) is the parent company of First Mid Bank & Trust, N.A., Jefferson Bank and Trust (First Mid Bank), First Mid Insurance Group (First Mid Insurance) and First Mid Wealth Management Company. First Mid provides a range of financial services, including banking, wealth management, brokerage, Ag services, and insurance through a network of locations throughout Illinois, Missouri, and Texas, and a loan production office in the greater Indianapolis area. First Mid Wealth Management Company offers services, such as retirement planning, financial planning and investment services. First Mid Wealth Management Company also offers trust and farm services. First Mid Insurance provides services, such as auto and homeowners insurance, business insurance, cyber insurance, life and health insurance, senior solutions and farm insurance. The Company's First Mid Ag Services manages, brokers, and values Midwest farmland and provides agricultural consulting services.

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 Mid Bancshares Inc has a Value Score of 65, which is considered to be undervalued.

First Mid Bancshares Inc’s price-earnings ratio is 8.6 compared to the industry median at 10.0. This means that it has a lower price relative to its earnings compared to its peers. This makes First Mid Bancshares Inc more attractive for value investors.

First Mid Bancshares Inc’s price-to-book ratio is higher than its peers. This could make First Mid Bancshares Inc less attractive for value investors when compared to the industry median at 1.16.

You can read more about First Mid Bancshares 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.

Generations Bancorp NY Inc’s Value Grade

Value Grade:

Generations Bancorp NY, Inc. is a stock holding company. It operates through Generations Bank and Generations Commercial Bank. Its segments include community banking, insurance agency, and municipal banking. The community banking segment provides financial services to consumers and businesses, principally in the Finger Lakes Region and Orleans County of New York State. These services include providing various types of loans to customers, accepting deposits, mortgage banking, and other traditional banking services. The insurance agency segment offers insurance coverage to businesses and individuals in the Finger Lakes Region. The municipal banking segment is a New York State-chartered limited-purpose commercial bank formed to enable local municipalities, primarily within the Finger Lakes Region and Northwest New York State, to deposit public funds with the Commercial Bank. It offers a variety of deposit accounts, including demand accounts, money market accounts, and savings account.

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.

Generations Bancorp NY Inc has a Value Score of 82, which is considered to be undervalued.

Generations Bancorp NY Inc’s price-earnings ratio is 16.4 compared to the industry median at 10.0. This means that it has a higher price relative to its earnings compared to its peers. This makes Generations Bancorp NY Inc less attractive for value investors.

Generations Bancorp NY Inc’s price-to-book ratio is higher than its peers. This could make Generations Bancorp NY Inc less attractive for value investors when compared to the industry median at 1.16.

You can read more about Generations Bancorp NY 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.

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 85, which is considered to be undervalued.

Kish Bancorp Inc’s price-earnings ratio is 6.9 compared to the industry median at 10.0. 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 fairly attractive for value investors when compared to the industry median at 1.16.

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 85, which is considered to be undervalued.

Nedbank Group Ltd. (ADR)’s price-earnings ratio is 8.7 compared to the industry median at 10.0. 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 1.16.

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.

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 5 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.

• Cadence Bank stock has a Value Grade of B.
• First Mid Bancshares Inc stock has a Value Grade of B.
• Generations Bancorp NY Inc stock has a Value Grade of A.
• Kish Bancorp Inc stock has a Value Grade of A.
• Nedbank Group Ltd. (ADR) stock has a Value Grade of A.

Now that you have a bit more background about each of the 5 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.

• 5 Undervalued Banks Stocks for Friday, March 03
• Which Is a Better Investment, Ameris Bancorp or Intercorp Financial Services Inc Stock?
• Which Is a Better Investment, Cadence Bank or Intercorp Financial Services Inc Stock?
• Which Is a Better Investment, Columbia Financial Inc or Intercorp Financial Services 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.