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 Friday, April 07, 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.

Ames National Corporation’s Value Grade

Value Grade:

Ames National Corporation is a bank holding company. The Bank?s lending activities consist primarily of short-term and medium-term commercial and agricultural real estate loans, residential real estate loans, agricultural and business operating loans and lines of credit, equipment loans, vehicle loans, personal loans and lines of credit, home improvement loans and origination of mortgage loans for sale into the secondary market. The Bank provides a variety of checking, savings and time deposits, cash management services, merchant credit card processing, safe deposit boxes, wire transfers, direct deposit and automated/video teller machine access. The Bank also offer trust services, which include wealth management services. It provides services, such as management assistance, internal auditing services, human resources services and administration, compliance management, marketing assistance and coordination, loan review, financial reporting, and property appraisals.

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.

Ames National Corporation has a Value Score of 65, which is considered to be undervalued.

When you look at Ames National Corporation’s price-to-sales ratio at 2.97 compared to the industry median at 2.42, this company has a higher price relative to revenue compared to its peers. This could make Ames National Corporation’s stock less attractive for value investors.

Ames National Corporation’s price-earnings ratio is 9.51 compared to the industry median at 8.24. This means it has a higher share price relative to earnings compared to its peers. This could make Ames National Corporation less attractive for value investors.

Now, let’s assess Ames National Corporation’s EV/EBITDA ratio, also known as enterprise multiple. At 6.8, when compared to the industry median of 6.7, 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. Ames National Corporation’s shareholder yield is higher than its industry median ratio of 3.86%. 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. Ames National Corporation’s price-to-book ratio is higher than its industry median ratio of 0.96. This could make Ames National Corporation less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Ames National Corporation’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Ames National Corporation’s price-to-free-cash-flow ratio is higher than its industry median ratio of 7.59. This could make Ames National Corporation less attractive because the higher P/FCF ratio indicates that Ames National Corporation 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.

CSB Bancorp Inc (Ohio)’s Value Grade

Value Grade:

CSB Bancorp, Inc. is a financial holding company. The Company operates through its wholly owned subsidiary, Commercial and Savings Bank of Millersburg, Ohio (the Bank). The Company operates primarily through the Bank and CSB Investment Services, LLC, providing a range of banking, trust, financial, and brokerage services to corporate, institutional, and individual customers throughout northeast Ohio. The Bank provides retail and commercial banking services to its customers, including checking and savings accounts, time deposits, individual retirement accounts (IRAs), safe deposit facilities, personal loans, commercial loans, real estate mortgage loans, installment loans, night depository facilities, brokerage, and trust services. The Bank also provides residential real estate, commercial real estate, commercial, and consumer loans to customers located primarily in Holmes, Stark, Tuscarawas, Wayne, and portions of surrounding counties in 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.

CSB Bancorp Inc (Ohio) has a Value Score of 79, which is considered to be undervalued.

CSB Bancorp Inc (Ohio)’s price-earnings ratio is 7.7 compared to the industry median at 8.2. This means that it has a lower price relative to its earnings compared to its peers. This makes CSB Bancorp Inc (Ohio) more attractive for value investors.

CSB Bancorp Inc (Ohio)’s price-to-book ratio is lower than its peers. This could make CSB Bancorp Inc (Ohio) more attractive for value investors when compared to the industry median at 0.96.

You can read more about CSB Bancorp Inc (Ohio)’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.

Hawthorn Bancshares, Inc.’s Value Grade

Value Grade:

Hawthorn Bancshares, Inc. is a bank holding company. Its activities are limited to ownership, indirectly through its subsidiary, Union State Bancshares, Inc. (Union), of the outstanding capital stock of Hawthorn Bank. Hawthorn Bank is a full-service bank conducting a general banking and trust business, offering its customers checking and savings accounts, Internet banking, debit cards, certificates of deposit, trust services, brokerage services, safety deposit boxes and a range of lending services, including commercial and industrial loans, single payment personal loans, installment loans and commercial and residential real estate loans. Hawthorn Bank has approximately 23 banking offices. Its subsidiaries include Union State Bancshares, Inc., Hawthorn Bank, Jefferson City IHC, LLC, Hawthorn Real Estate, LLC, HB Realty, LLC and Hawthorn Risk Management, Inc.

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.

Hawthorn Bancshares, Inc. has a Value Score of 77, which is considered to be undervalued.

Hawthorn Bancshares, Inc.’s price-earnings ratio is 7.5 compared to the industry median at 8.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Hawthorn Bancshares, Inc. more attractive for value investors.

Hawthorn Bancshares, Inc.’s price-to-book ratio is lower than its peers. This could make Hawthorn Bancshares, Inc. more attractive for value investors when compared to the industry median at 0.96.

You can read more about Hawthorn 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.

JPMorgan Chase & Co’s Value Grade

Value Grade:

JPMorgan Chase & Co. is a financial holding company. It has four segments: Consumer & Community Banking (CCB), Corporate & Investment Bank (CIB), Commercial Banking (CB), and Asset & Wealth Management (AWM). CCB segment offers products and services to consumers and small businesses through bank branches; ATMs; digital, including mobile and online; and telephone banking. CIB segment consists of banking and markets and securities services, offers a suite of investment banking, market-making, prime brokerage, lending, and treasury and securities products and services to a global client base of corporations, investors, financial institutions, merchants, government and municipal entities. CB segment provides financial solutions, including lending, payments, investment banking and asset management products across three primary client segments: middle market banking, corporate client banking and commercial real estate banking. AWM segment is engaged in 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 77, which is considered to be undervalued.

JPMorgan Chase & Co’s price-earnings ratio is 10.5 compared to the industry median at 8.2. 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 0.96.

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.

Pacific Financial Corporation’s Value Grade

Value Grade:

Pacific Financial Corporation is the bank holding company for Bank of the Pacific (the Bank), a state chartered commercial bank. The Bank offers banking products and services to small-to-medium sized businesses and professionals. The Bank provides a range of services, such as personal banking, business banking, online banking and home loans. Its personal banking provides personal banking, savings solutions, investments, consumer loans & lines of credit, account switch kit, rates, consumer fee schedule and pay loan online. The Bank's business banking provides business checking, business savings options, commercial and industrial loans, commercial real estate, contact a commercial lender, merchant services and treasury management. Its online banking provides personal online, personal bill pay, business online, business bill pay, mobile and browser security. The Banks home loan banking provides mortgage loan specialists, purchase, refinance and home equity loan.

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.

Pacific Financial Corporation has a Value Score of 77, which is considered to be undervalued.

Pacific Financial Corporation’s price-earnings ratio is 9.6 compared to the industry median at 8.2. This means that it has a higher price relative to its earnings compared to its peers. This makes Pacific Financial Corporation less attractive for value investors.

Pacific Financial Corporation’s price-to-book ratio is lower than its peers. This could make Pacific Financial Corporation more attractive for value investors when compared to the industry median at 0.96.

You can read more about Pacific 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.

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 92, which is considered to be undervalued.

Touchstone Bank’s price-earnings ratio is 7.0 compared to the industry median at 8.2. 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 0.96.

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.

United Security Bancshares’s Value Grade

Value Grade:

United Security Bancshares is the bank holding company for United Security Bank (the Bank). The Bank is a state-chartered bank and offers a range of commercial banking services to the business and professional community and individuals. It provides a variety of deposit instruments, including personal and business checking accounts and savings accounts, interest-bearing negotiable order of withdrawal (NOW) accounts and money market accounts. Its lending activities include real estate mortgage, commercial and industrial, real estate construction, agricultural, and installment loans. The Bank operates approximately 12 full-service branch offices in Fresno, Bakersfield, Campbell, Caruthers, Coalinga, Firebaugh, Mendota, Oakhurst, San Joaquin and Taft. It offers a range of services for commercial customers and account holders, including online banking, mobile banking, safe deposit boxes, wire transfers, ATM services, payroll direct deposit, cashier's checks, and cash management 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.

United Security Bancshares has a Value Score of 89, which is considered to be undervalued.

United Security Bancshares’s price-earnings ratio is 6.7 compared to the industry median at 8.2. This means that it has a lower price relative to its earnings compared to its peers. This makes United Security Bancshares more attractive for value investors.

United Security Bancshares’s price-to-book ratio is higher than its peers. This could make United Security Bancshares less attractive for value investors when compared to the industry median at 0.96.

You can read more about United Security Bancshares’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.

• Ames National Corporation stock has a Value Grade of B.
• CSB Bancorp Inc (Ohio) stock has a Value Grade of B.
• Hawthorn Bancshares, Inc. stock has a Value Grade of B.
• JPMorgan Chase & Co stock has a Value Grade of B.
• Pacific Financial Corporation stock has a Value Grade of B.
• Touchstone Bank stock has a Value Grade of A.
• United Security Bancshares 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 Friday, April 07
• Is Akbank T.A.S. (ADR) (AKBTY) a Good Dividend Stock?
• 3 Undervalued Banks Stocks for Thursday, April 06
• Is Akbank T.A.S. (ADR) (AKBTY) Stock a Good Investment?

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