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 14, 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 2.98 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 9.56 compared to the industry median at 8.25. 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 3.82%. 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 0.95. 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 7.68. 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.

Bank of Montreal’s Value Grade

Value Grade:

Bank of Montreal (BMO) is a Canada-based financial services provider. The Bank provides a range of personal and commercial banking, wealth management, global markets and investment banking products and services. The Bank conducts its business through three operating groups: Personal and Commercial Banking, BMO Wealth Management and BMO Capital Markets. The Personal and Commercial Banking business includes two retail and business banking operating segments, such as Canadian Personal and Commercial Banking and the United States Personal and Commercial Banking. BMO Wealth Management business provides a full range of clients, from individuals and families to business owners and institutions, offering a wide spectrum of wealth, asset management and insurance products and services. BMO Capital Markets provides products and services to North American and international corporate, institutional and government clients through its investment and corporate banking and global markets divisions.

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 Montreal has a Value Score of 66, which is considered to be undervalued.

Bank of Montreal’s price-earnings ratio is 7.7 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 Bank of Montreal more attractive for value investors.

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

You can read more about Bank of Montreal’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.

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.

First Busey Corp’s price-earnings ratio is 8.5 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 First Busey Corp less attractive for value investors.

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

You can read more about First Busey 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.

C&F; Financial Corp’s Value Grade

Value Grade:

C&F; Financial Corporation is a bank holding company, which conducts its operations through its subsidiaries, including Citizens and Farmers Bank (the Bank). The Company operates through three segments. Community Banking segment operates through C&F; Bank, which provides a range of banking services to individuals and businesses, including various types of checking and savings deposit accounts, as well as business, real estate, development, mortgage, home equity and installment loans. Mortgage banking segment operates through C&F; Mortgage, which provides mortgage loan origination services through 14 locations in Virginia and one each in Maryland, North Carolina, South Carolina, and West Virginia. The segment offers a range of residential mortgage loans, which are originated for sale to investors in the secondary mortgage market. Consumer finance segment conducts its activities through C&F; Finance, which provides automobile financing through lending programs.

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.

C&F; Financial Corp has a Value Score of 91, which is considered to be undervalued.

C&F; Financial Corp’s price-earnings ratio is 6.7 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 C&F; Financial Corp more attractive for value investors.

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

You can read more about C&F; 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.

First Farmers and Merchants Corp’s Value Grade

Value Grade:

First Farmers and Merchants Corporation is a bank holding company whose principal activity is the ownership and management of its wholly owned subsidiary, First Farmers & Merchants Bank (the Bank). The Bank is engaged in providing personal banking, business banking, wealth management and business treasury management. Its personal banking provides retire and invest, credit cards, personal lending and online and mobile banking. Its business banking provides business retire and invest, business treasury management, business loans, business credit cards and business online and mobile banking. The Bank’s wealth management provides trust services and investment services. The Bank is also providing a range of banking and financial services, including lending, investing of funds, obtaining deposits, trust and wealth management operations, and other financing activities to individual and corporate customers in the Middle Tennessee area.

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 Farmers and Merchants Corp has a Value Score of 91, which is considered to be undervalued.

First Farmers and Merchants Corp’s price-earnings ratio is 5.0 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 First Farmers and Merchants Corp more attractive for value investors.

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

You can read more about First Farmers and Merchants 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.

Mizuho Financial Group Inc (ADR)’s Value Grade

Value Grade:

Mizuho Financial Group Inc is a Japan-based bank holding company mainly engaged in the business of bank holding companies, banks, securities specialist companies and other companies. The Company operates through five business segments. The Retail and Corporate Company segment operates for domestic individuals, small and medium enterprises and mid-sized customers. The Large Corporate, Financial and Public Corporation Company segment operates for clients of large corporate corporations, financial corporations and public corporations in Japan. The Global Corporate Company segment operates for clients of overseas-affiliated Japanese companies and non-Japanese companies. The Global Markets Company segment is engaged in investment business in interest rates, equity, among others. The Asset Management Company segment is engaged in the development and provision of products that meet the asset management needs of clients from individuals to institutional investors.

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.

Mizuho Financial Group Inc (ADR) has a Value Score of 72, which is considered to be undervalued.

Mizuho Financial Group Inc (ADR)’s price-to-book ratio is higher than its peers. This could make Mizuho Financial Group Inc (ADR) less attractive for value investors when compared to the industry median at 0.95.

You can read more about Mizuho Financial Group Inc (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.

Sandy Spring Bancorp Inc’s Value Grade

Value Grade:

Sandy Spring Bancorp, Inc. is the bank holding company for Sandy Spring Bank (the Bank). The Company operates through two segments: Community Banking and Investment Management. The Company's Community Banking segment operates through Sandy Spring Bank and involves delivering a range of financial products and services, including various loan and deposit products, to both individuals and businesses. The Investment Management segment operates through West Financial Services, Inc. and Rembert Pendleton Jackson (RPJ), a subsidiary of the Bank, which provides investment management and financial planning services to individuals, families, small businesses and associations, including cash flow analysis, investment review, tax planning, retirement planning, insurance analysis and estate planning. The Bank offers a range of commercial and retail banking, mortgage, private banking and trust services at over 50 locations throughout central Maryland, northern Virginia, and Washington D.C.

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.

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

Sandy Spring Bancorp Inc’s price-earnings ratio is 6.5 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 Sandy Spring Bancorp Inc more attractive for value investors.

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

You can read more about Sandy Spring 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.

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.
• Bank of Montreal stock has a Value Grade of B.
• First Busey Corp stock has a Value Grade of B.
• C&F; Financial Corp stock has a Value Grade of A.
• First Farmers and Merchants Corp stock has a Value Grade of A.
• Mizuho Financial Group Inc (ADR) stock has a Value Grade of B.
• Sandy Spring Bancorp Inc 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 14
• 6 Undervalued Banks Stocks for Thursday, April 13
• Why Associated Banc Corp’s (ASB) Stock Is Up 4.07%
• Why Greene County Bancorp Inc’s (GCBC) Stock Is Up 6.03%

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.