Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 6 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.

Click the button below to learn more about A+ Investor and subscribe today.

6 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 6 undervalued stocks in the Banks industry for Thursday, April 13, 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.

First Busey Corp’s Value Grade

Value Grade:

First Busey Corporation is a bank holding company, which operates through its subsidiary, Busey Bank. The Company has three segments. The Banking segment provides a full range of banking services to individual and corporate customers through its banking center network in Illinois; the St. Louis, Missouri metropolitan area; southwest Florida; and Indianapolis, Indiana. The FirsTech segment provides comprehensive payment technology solutions, including online, mobile and voice-recognition bill payments; money management and credit card networks; direct debit services; lockbox remittance processing for payments made by mail; and walk-in payments. The segment also provides additional tools to help clients with billing, reconciliation, bill reminders, and treasury services. The Wealth Management segment provides a full range of asset management, investment, brokerage, fiduciary, philanthropic advisory, tax preparation and farm management services to individuals, businesses, and foundations.

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 Busey Corp has a Value Score of 75, which is considered to be undervalued.

When you look at First Busey Corp’s price-to-sales ratio at 3.00 compared to the industry median at 2.42, this company has a higher price relative to revenue compared to its peers. This could make First Busey Corp’s stock less attractive for value investors.

First Busey Corp’s price-earnings ratio is 8.52 compared to the industry median at 8.28. This means it has a higher share price relative to earnings compared to its peers. This could make First Busey Corp less attractive for value investors.

Now, let’s assess First Busey Corp’s EV/EBITDA ratio, also known as enterprise multiple. At 7.5, when compared to the industry median of 6.6, 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. First Busey Corp’s shareholder yield is higher 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. First Busey Corp’s price-to-book ratio is lower than its industry median ratio of 0.95. This could make First Busey Corp more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at First Busey Corp’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. First Busey Corp’s price-to-free-cash-flow ratio is higher than its industry median ratio of 7.61. This could make First Busey Corp less attractive because the higher P/FCF ratio indicates that First Busey Corp 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.

Eagle Bancorp Montana Inc’s Value Grade

Value Grade:

Eagle Bancorp Montana, Inc. is a bank holding company for Opportunity Bank of Montana (the Bank). It offers loan and deposit services to small businesses and individuals throughout Montana. It is a diversified lender with a focus on residential mortgage loans, commercial real estate mortgage loans, commercial business loans, agricultural loans and second mortgage/home equity loan products. It invests in various types of investment securities, including United States Treasury obligations, securities of various Federal agencies, certificates of deposits of insured banks and savings institutions, municipal securities, corporate debt securities and loans to other banking institutions. It offers a variety of deposit accounts, including checking, savings and money market accounts. It also originates in commercial real estate, home equity, and consumer and commercial loans. It originates residential one-four family loans held for investment and originated for sale in the secondary market.

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.

Eagle Bancorp Montana Inc has a Value Score of 70, which is considered to be undervalued.

Eagle Bancorp Montana Inc’s price-earnings ratio is 9.7 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 Eagle Bancorp Montana Inc less attractive for value investors.

Eagle Bancorp Montana Inc’s price-to-book ratio is higher than its peers. This could make Eagle Bancorp Montana Inc less attractive for value investors when compared to the industry median at 0.95.

You can read more about Eagle Bancorp Montana 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.

Enterprise Bancorp Inc’s Value Grade

Value Grade:

Enterprise Bancorp, Inc. operates as the parent holding company of Enterprise Bank and Trust Company (the Bank). The Company is primarily engaged in the business of gathering deposits from the general public and investing primarily in loans and investment securities. It offers a range of commercial, residential and consumer loan products, deposit products and cash management services, as well as wealth management and wealth services. The Bank also offers various digital banking capabilities through online and mobile platforms. It specializes in lending to business entities, non-profit organizations, professional practices, and individuals. Its lending products include commercial real estate, commercial and industrial, and commercial construction loans; residential loans; home equity loans and lines of credit; consumer loans; and credit risk and allowance for credit losses. Its commercial real estate loans include loans secured by both owner and non-owner-occupied real estate.

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.

Enterprise Bancorp Inc has a Value Score of 68, which is considered to be undervalued.

Enterprise Bancorp Inc’s price-earnings ratio is 8.7 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 Enterprise Bancorp Inc less attractive for value investors.

Enterprise Bancorp Inc’s price-to-book ratio is lower than its peers. This could make Enterprise Bancorp Inc more attractive for value investors when compared to the industry median at 0.95.

You can read more about Enterprise 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.

FB Financial Corp’s Value Grade

Value Grade:

FB Financial Corporation is a financial holding company. The Company operates through its wholly owned banking subsidiary, FirstBank (the Bank). The Company operates through two segments: Banking and Mortgage. Its Banking segment provides a full range of deposit and lending products and services to corporate, commercial and consumer customers. Its Mortgage segment originates conforming residential mortgage loans, which include the servicing of residential mortgage loans and the packaging and securitization of loans to governmental agencies. It provides a range of commercial and consumer banking services to clients in select markets primarily in Tennessee, Kentucky, Alabama and North Georgia. It operates approximately 82 full-service bank branches and several other limited-service banking, ATM and mortgage loan production locations serving the Tennessee metropolitan markets. It also provides banking services to over 16 community markets throughout Tennessee, Alabama, and North Georgia.

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.

FB Financial Corp has a Value Score of 74, which is considered to be undervalued.

FB Financial Corp’s price-earnings ratio is 11.4 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 FB Financial Corp less attractive for value investors.

FB Financial Corp’s price-to-book ratio is lower than its peers. This could make FB Financial Corp more attractive for value investors when compared to the industry median at 0.95.

You can read more about FB Financial 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.

Southern Banc Company Inc’s Value Grade

Value Grade:

The Southern Banc Company, Inc. is a bank holding company for The Southern Bank Company (Bank). The Bank is engaged in providing both personal and business banking solutions. The Bank’s full-service branch locations in Northeast Alabama offer banking solutions for every personal banking need including personal checking, mortgage loans, consumer loans, and home equity lines of credit. The Bank works with small and medium-sized business customers to offer practical solutions for deposit and borrowing needs. Its business banking products include real estate lending, equipment financing, cash flow management and business checking. It has developed altLINE, an accounts receivable-based financing platform for commercial customers. The Bank's altLINE program unlocks the value in customers outstanding invoices through invoice factoring, accounts receivable financing and asset-based lending. Its branches are located in Gadsden, Albertville, Centre, Guntersville and Birmingham.

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.

Southern Banc Company Inc has a Value Score of 84, which is considered to be undervalued.

Southern Banc Company Inc’s price-earnings ratio is 4.3 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 Southern Banc Company Inc more attractive for value investors.

Southern Banc Company Inc’s price-to-book ratio is lower than its peers. This could make Southern Banc Company Inc more attractive for value investors when compared to the industry median at 0.95.

You can read more about Southern Banc Company 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 0.95.

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 6 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.

• First Busey Corp stock has a Value Grade of B.
• Eagle Bancorp Montana Inc stock has a Value Grade of B.
• Enterprise Bancorp Inc stock has a Value Grade of B.
• FB Financial Corp stock has a Value Grade of B.
• Southern Banc Company Inc stock has a Value Grade of A.
• Virginia National Bankshares Corp stock has a Value Grade of B.

Now that you have a bit more background about each of the 6 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.

• 6 Undervalued Banks Stocks for Thursday, April 13
• 5 Undervalued Banks Stocks for Wednesday, April 12
• Why Banco Macro SA (ADR)’s (BMA) Stock Is Up 4.38%
• Why Grupo Financiero Galicia S.A. (ADR)’s (GGAL) Stock Is Up 6.09%

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.