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 Wednesday, April 12, 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.

Colony Bankcorp Inc’s Value Grade

Value Grade:

Colony Bankcorp, Inc. is a bank holding company that operates through its subsidiary, Colony Bank (the Bank). The Bank's product line includes loans to small and medium-sized businesses, residential and commercial construction and land development loans, commercial real estate loans, commercial loans, agri-business and production loans, residential mortgage loans, home equity loans, consumer loans and a variety of demand, savings and time deposit products. The Company operates through three segments: the Banking Division, the Retail Mortgage Division and the Small Business Specialty Lending Division. The Banking Division derives full-service financial services, including commercial loans, consumer loans and deposit accounts. The Retail Mortgage offers services for one-to-four family residential mortgage loans. The Small Business Specialty Lending Division offers small business administration (SBA) and United States Department of Agriculture (USDA) government guaranteed 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.

Colony Bankcorp Inc has a Value Score of 69, which is considered to be undervalued.

When you look at Colony Bankcorp Inc’s price-to-sales ratio at 1.89 compared to the industry median at 2.43, this company has a lower price relative to revenue compared to its peers. This could make Colony Bankcorp Inc’s stock more attractive for value investors.

Colony Bankcorp Inc’s price-earnings ratio is 8.58 compared to the industry median at 8.30. This means it has a higher share price relative to earnings compared to its peers. This could make Colony Bankcorp Inc less attractive for value investors.

Now, let’s assess Colony Bankcorp Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 6.5, when compared to the industry median of 6.6, 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. Colony Bankcorp Inc’s shareholder yield is lower than its industry median ratio of 3.84%. 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. Colony Bankcorp Inc’s price-to-book ratio is lower than its industry median ratio of 0.96. This could make Colony Bankcorp Inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Colony Bankcorp Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Colony Bankcorp Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 7.65. This could make Colony Bankcorp Inc more attractive because the lower P/FCF ratio indicates that Colony Bankcorp Inc 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.

Customers Bancorp Inc’s Value Grade

Value Grade:

Customers Bancorp, Inc. is a bank holding company. It is engaged in banking activities through its subsidiary, Customers Bank (The Bank). The Bank has diversified lending activities and serves its customers through a single-point-of-contact private banking strategy with a focus on community banking businesses, including commercial and industrial and commercial real estate loans to borrowers in Pennsylvania, New Jersey, New York City, New England and other geographies, multifamily lending, small business administration lending and residential mortgage lending. The Bank also serves specialty niche businesses nationwide, including its specialty lending, commercial loans to mortgage companies and commercial equipment financing. The Bank offers digital banking to commercial and consumer businesses nationwide, including banking-as-a-service to fintech companies, payments and treasury services, such as CBIT to businesses, and consumer loans through relationships with fintech companies.

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.

Customers Bancorp Inc has a Value Score of 97, which is considered to be undervalued.

Customers Bancorp Inc’s price-earnings ratio is 2.7 compared to the industry median at 8.3. This means that it has a lower price relative to its earnings compared to its peers. This makes Customers Bancorp Inc more attractive for value investors.

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

You can read more about Customers 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.

High Country Bancorp, Inc.’s Value Grade

Value Grade:

High Country Bancorp, Inc. operates as a bank holding company. The Company, through its subsidiary, High Country Bank (the Bank), provides banking services. The Bank provides a range of financial services to the area it serves. Its primary deposit products are noninterest-bearing and interest-bearing checking accounts, savings accounts, and time deposit accounts. Its primary lending products are real estate mortgage, construction, consumer, and commercial loans. The Bank’s personal products and services include checking, savings and money market, certificate of deposits (CDs) and individual retirement accounts (IRAs), credit and debit cards, money desktop, mobile banking and personal loans. Its business products and services include commercial checking, savings and CDs, commercial credit and debit cards and merchant card services. The Bank conducts business through its main office in Salida, Colorado and branch offices in Salida, Buena Vista, Canon City and Longmont, Colorado.

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.

High Country Bancorp, Inc. has a Value Score of 87, which is considered to be undervalued.

High Country Bancorp, Inc.’s price-earnings ratio is 8.0 compared to the industry median at 8.3. This means that it has a lower price relative to its earnings compared to its peers. This makes High Country Bancorp, Inc. more attractive for value investors.

High Country Bancorp, Inc.’s price-to-book ratio is higher than its peers. This could make High Country Bancorp, Inc. less attractive for value investors when compared to the industry median at 0.96.

You can read more about High Country 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.

Northfield Bancorp Inc’s Value Grade

Value Grade:

Northfield Bancorp, Inc. is the holding company for Northfield Bank (the Bank). The Bank is a federally chartered savings bank. The Bank principal business consists of originating commercial real estate loans, construction and land loans, commercial and industrial loans, and home equity loans and lines of credit. It offers a variety of deposit accounts, including certificates of deposit, passbook, statement, and money market savings accounts, transaction deposit accounts negotiable orders of withdrawal accounts and interest and non-interest-bearing demand accounts, individual retirement accounts, and brokered deposits. Its principal lending activity is the origination of multifamily real estate loans and, to a lesser extent, other commercial real estate loans, in New York City, New Jersey, and eastern Pennsylvania. It also originates one-to-four family residential real estate loans, construction and land loans, commercial and industrial loans, and home equity loans and lines of credit.

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.

Northfield Bancorp Inc has a Value Score of 72, which is considered to be undervalued.

Northfield Bancorp Inc’s price-earnings ratio is 8.6 compared to the industry median at 8.3. This means that it has a higher price relative to its earnings compared to its peers. This makes Northfield Bancorp Inc less attractive for value investors.

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

You can read more about Northfield 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.

Virginia National Bankshares Corp’s Value Grade

Value Grade:

Virginia National Bankshares Corporation is a bank holding company for Virginia National Bank (the Bank). The Bank is engaged in commercial and retail banking business. It operates through four segments: Bank, VNB Trust and Estate Services, Sturman Wealth Advisors, and Masonry Capital. Bank segment offers loans, deposits and related services to individuals, businesses and charitable organizations. It offers services, including checking accounts, NOW accounts, money market deposit accounts, certificates of deposit and various other services. VNB Trust and Estate Services segment offers corporate trustee services, trust and estate administration, IRA administration, custody service and in-house investment management services. Sturman Wealth Advisors segment offers wealth and investment advisory services. Masonry Capital segment offers investment management services for separately managed accounts and a private investment fund employing a value-based, catalyst-driven investment strategy.

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.

Virginia National Bankshares Corp has a Value Score of 67, which is considered to be undervalued.

Virginia National Bankshares Corp’s price-earnings ratio is 8.2 compared to the industry median at 8.3. This means that it has a lower price relative to its earnings compared to its peers. This makes Virginia National Bankshares Corp more attractive for value investors.

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

You can read more about Virginia National Bankshares 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.

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.

• Colony Bankcorp Inc stock has a Value Grade of B.
• Customers Bancorp Inc stock has a Value Grade of A.
• High Country Bancorp, Inc. stock has a Value Grade of A.
• Northfield Bancorp Inc stock has a Value Grade of B.
• Virginia National Bankshares Corp stock has a Value Grade of B.

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 Wednesday, April 12
• 7 Undervalued Banks Stocks for Tuesday, April 11
• Why Grupo Financiero Galicia S.A. (ADR)’s (GGAL) Stock Is Up 4.67%
• 4 Undervalued Banks Stocks for Monday, April 10

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.