Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 4 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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4 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 4 undervalued stocks in the Banks industry for Monday, April 10, 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.

ANZ Group Holdings Ltd (ADR)’s Value Grade

Value Grade:

ANZ Group Holdings Limited is an Australia-based non-operating holding company. The Company comprises banking and non-banking businesses and assets and provides banking and financial products and services. The banking and financial products and services include retail and commercial and private bank services to customers in Australia; institutional services in Australia, New Zealand, Asia, Europe and the United States; personal and business services in New Zealand; and products and services to retail and commercial customers in the Pacific Islands.

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.

ANZ Group Holdings Ltd (ADR) has a Value Score of 67, which is considered to be undervalued.

When you look at ANZ Group Holdings Ltd (ADR)’s price-to-sales ratio at 2.79 compared to the industry median at 2.42, this company has a higher price relative to revenue compared to its peers. This could make ANZ Group Holdings Ltd (ADR)’s stock less attractive for value investors.

ANZ Group Holdings Ltd (ADR)’s price-earnings ratio is 9.82 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 ANZ Group Holdings Ltd (ADR) less attractive for value investors.

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. ANZ Group Holdings Ltd (ADR)’s shareholder yield is lower 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. ANZ Group Holdings Ltd (ADR)’s price-to-book ratio is higher than its industry median ratio of 0.96. This could make ANZ Group Holdings Ltd (ADR) less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at ANZ Group Holdings Ltd (ADR)’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. ANZ Group Holdings Ltd (ADR)’s price-to-free-cash-flow ratio is lower than its industry median ratio of 7.59. This could make ANZ Group Holdings Ltd (ADR) more attractive because the lower P/FCF ratio indicates that ANZ Group Holdings Ltd (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.

Arrow Financial Corporation’s Value Grade

Value Grade:

Arrow Financial Corporation (Arrow) is a bank holding company. Arrow is engaged in a range of lending activities, including commercial and industrial lending primarily to small and mid-sized companies; mortgage lending for residential and commercial properties; and consumer installment and home equity financing. Arrow provides services, such as trust administration, retirement plan administration, advice to its proprietary mutual funds and insurance products. The Company offers a range of commercial and consumer banking and financial products. The deposit base consists of deposits derived principally from the communities served. Arrow targets lending activities to consumers and small- and mid-sized companies in Arrow's regional geographic area. The Company provides retirement planning, trust and estate administration. Arrow's subsidiaries include Glens Falls National Bank and Trust Company (Glens Falls National) and Saratoga National Bank and Trust Company (Saratoga National).

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.

Arrow Financial Corporation has a Value Score of 72, which is considered to be undervalued.

Arrow Financial Corporation’s price-earnings ratio is 7.9 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 Arrow Financial Corporation more attractive for value investors.

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

You can read more about Arrow 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.

Bank of America Corp’s Value Grade

Value Grade:

Bank of America Corporation is a bank holding company and a financial holding company. Its segments include Consumer Banking, Global Wealth & Investment Management (GWIM), Global Banking and Global Markets. Consumer Banking segment offers a range of credit, banking and investment products and services to consumers and small businesses. The GWIM includes two businesses: Merrill Wealth Management, which provides tailored solutions to meet clients' needs through a full set of investment management, brokerage, banking and retirement products and Bank of America Private Bank, which provides comprehensive wealth management solutions. Global Banking segment provides a range of lending-related products and services, integrated working capital management and treasury solutions, and underwriting and advisory services. Global Markets segment offers sales and trading services and research services to institutional clients across fixed-income, credit, currency, commodity, and equity businesses.

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.

Bank of America Corp has a Value Score of 65, which is considered to be undervalued.

Bank of America Corp’s price-earnings ratio is 8.7 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 Bank of America Corp less attractive for value investors.

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

You can read more about Bank of America 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.

Canadian Imperial Bank of Commerce (USA)’s Value Grade

Value Grade:

Canadian Imperial Bank of Commerce is a Canada-based financial institution. The Company offers a full range of advice, solutions and services through its digital banking network across personal and business banking, commercial banking and wealth management, and capital markets businesses. Its personal banking offers products and services, including personal checking, health savings account, personal lending, EasyPath banking, personal savings, retirement, traditions club and mortgage. Its private wealth offers investment management, corporate and institutional services, wealth planning and trustee services and private banking. The Company’s commercial banking includes commercial lending, capital markets, commercial real estate and treasury management. It also includes small business banking and agility digital banking. The Company has over 13 million personal banking, business, public sector and institutional clients.

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.

Canadian Imperial Bank of Commerce (USA) has a Value Score of 82, which is considered to be undervalued.

Canadian Imperial Bank of Commerce (USA)’s price-earnings ratio is 11.3 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 Canadian Imperial Bank of Commerce (USA) less attractive for value investors.

Canadian Imperial Bank of Commerce (USA)’s price-to-book ratio is lower than its peers. This could make Canadian Imperial Bank of Commerce (USA) more attractive for value investors when compared to the industry median at 0.96.

You can read more about Canadian Imperial Bank of Commerce (USA)’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 4 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.

• ANZ Group Holdings Ltd (ADR) stock has a Value Grade of B.
• Arrow Financial Corporation stock has a Value Grade of B.
• Bank of America Corp stock has a Value Grade of B.
• Canadian Imperial Bank of Commerce (USA) stock has a Value Grade of A.

Now that you have a bit more background about each of the 4 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.

• 4 Undervalued Banks Stocks for Monday, April 10
• Which Is a Better Investment, First Bancorp or First Horizon Corp Stock?
• 7 Undervalued Banks Stocks for Friday, April 07
• Is Akbank T.A.S. (ADR) (AKBTY) a Good Dividend 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.