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.

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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 Monday, April 17, 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.

Bankinter SA - ADR’s Value Grade

Value Grade:

Bankinter SA is a Spain-based financial institution (the Bank) primarily engaged in the banking sector. The Bank's activities are divided into four business segments: Commercial banking, which offers current accounts, fixed-term deposits, investment management and advisory, as well as mortgage loans, among others, to individual customers; Corporate banking, which provides financial services to small and medium-sized companies, corporations and government bodies; Consumer finance, which focuses on personal loans and credit card services through Bankinter Consumer Finance EFC, and Other, which includes online savings accounts, among others. The Company operates through numerous subsidiaries, such as Bankinter Gestion de Activos SGIIC, Hispamarket SA, Bankinter Capital Riesgo SGECR SA and Bankinter Sociedad de Financiacion SAU.

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.

Bankinter SA - ADR has a Value Score of 77, which is considered to be undervalued.

When you look at Bankinter SA - ADR’s price-to-sales ratio at 2.80 compared to the industry median at 2.43, this company has a higher price relative to revenue compared to its peers. This could make Bankinter SA - ADR’s stock less attractive for value investors.

Bankinter SA - ADR’s price-earnings ratio is 9.03 compared to the industry median at 8.12. This means it has a higher share price relative to earnings compared to its peers. This could make Bankinter SA - 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. Bankinter SA - ADR’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. Bankinter SA - ADR’s price-to-book ratio is higher than its industry median ratio of 0.94. This could make Bankinter SA - ADR less attractive to investors looking for a new addition to their portfolio.

Bank of Nova Scotia’s Value Grade

Value Grade:

The Bank of Nova Scotia is an international bank and a financial services provider in Latin America, the Caribbean and Central America, and Asia. The Bank offers a range of advice, products and services, including personal and commercial banking, wealth management and private banking, corporate and investment banking, and capital markets. Its segments include Canadian Banking, which provides a suite of financial advice and banking solutions to retail, small business, commercial and wealth management customers; International Banking, which provides a range of financial products, solutions and advice to retail and commercial customers in select regions outside of Canada; Global Wealth Management, which focuses on delivering wealth management advice and solutions, and Global Banking and Markets (GBM), which provides lending and transaction services, investment banking advice and access to capital markets.

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 Nova Scotia has a Value Score of 75, which is considered to be undervalued.

Bank of Nova Scotia’s price-earnings ratio is 9.4 compared to the industry median at 8.1. This means that it has a higher price relative to its earnings compared to its peers. This makes Bank of Nova Scotia less attractive for value investors.

Bank of Nova Scotia’s price-to-book ratio is lower than its peers. This could make Bank of Nova Scotia more attractive for value investors when compared to the industry median at 0.94.

You can read more about Bank of Nova Scotia’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.

Financial Institutions Inc’s Value Grade

Value Grade:

Financial Institutions, Inc. is a financial holding company. The Company provides a full range of banking and related financial services to consumer, commercial and municipal customers through its bank and nonbank subsidiaries. It offers a range of deposit, lending and other financial services to individuals, municipalities and businesses in Western and Central New York through its banking subsidiary, Five Star Bank. Its indirect lending network includes relationships with franchised automobile dealers in Western and Central New York, the Capital District of New York, and Northern and Central Pennsylvania. It offers insurance services through its subsidiary, SDN Insurance Agency, LLC. It offers customized investment advice, wealth management, investment consulting and retirement plan services through its subsidiaries Courier Capital, LLC and HNP Capital, LLC. It also offers banking as a service and financial technology solutions through its subsidiary Corn Hill Innovation Labs, LLC.

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.

Financial Institutions Inc has a Value Score of 97, which is considered to be undervalued.

Financial Institutions Inc’s price-earnings ratio is 5.0 compared to the industry median at 8.1. This means that it has a lower price relative to its earnings compared to its peers. This makes Financial Institutions Inc more attractive for value investors.

Financial Institutions Inc’s price-to-book ratio is higher than its peers. This could make Financial Institutions Inc less attractive for value investors when compared to the industry median at 0.94.

You can read more about Financial Institutions 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.

Live Oak Bancshares Inc’s Value Grade

Value Grade:

Live Oak Bancshares, Inc. is a bank holding company. The Company conducts business operations through its commercial bank subsidiary, Live Oak Banking Company (the Bank). The Bank specializes in providing lending and deposit-related services to small businesses nationwide. Its segments include Banking and Fintech. The Banking segment specializes in providing financing services to small businesses nationwide in industries and deposit-related services to small businesses, consumers, and other customers nationwide. The Fintech segment is involved in making strategic investments in emerging financial technology companies. The Fintech segment is comprised of the Company's direct wholly owned subsidiaries, Live Oak Ventures, Inc. and Canapi Advisors, LLC, and the investments held by those entities, as well as the Bank's investment in Apiture, Inc. Its loan portfolio includes commercial and industrial loans, construction and development loans, commercial real estate, and commercial land.

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.

Live Oak Bancshares Inc has a Value Score of 68, which is considered to be undervalued.

Live Oak Bancshares Inc’s price-earnings ratio is 5.9 compared to the industry median at 8.1. This means that it has a lower price relative to its earnings compared to its peers. This makes Live Oak Bancshares Inc more attractive for value investors.

Live Oak Bancshares Inc’s price-to-book ratio is lower than its peers. This could make Live Oak Bancshares Inc more attractive for value investors when compared to the industry median at 0.94.

You can read more about Live Oak 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.

MainStreet Bancshares Inc’s Value Grade

Value Grade:

MainStreet Bancshares, Inc. is a bank holding company that owns MainStreet Bank (the Bank) and MainStreet Community Capital, LLC. The Bank is a community bank focused on serving the borrowing, cash management and depository needs of retail customers, small to medium-sized businesses, and professionals. The Company's products and services include business and consumer checking, premium interest-bearing checking, business account analysis, savings, certificates of deposit and other depository services, as well as an array of commercial, real estate and consumer loans. The Bank offers an array of deposit products that include demand, money market and savings accounts, as well as certificates of deposit. It also provides full online business banking solutions, including remote check scanners. It offers a full range of banking services to individuals, small to medium-sized businesses and professional service organizations through both traditional and electronic delivery.

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.

MainStreet Bancshares Inc has a Value Score of 85, which is considered to be undervalued.

MainStreet Bancshares Inc’s price-earnings ratio is 6.9 compared to the industry median at 8.1. This means that it has a lower price relative to its earnings compared to its peers. This makes MainStreet Bancshares Inc more attractive for value investors.

MainStreet Bancshares Inc’s price-to-book ratio is lower than its peers. This could make MainStreet Bancshares Inc more attractive for value investors when compared to the industry median at 0.94.

You can read more about MainStreet 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.

Penns Woods Bancorp, Inc.’s Value Grade

Value Grade:

Penns Woods Bancorp, Inc. is a bank holding company. The Company is engaged in managing and supervising the Banks. The Company operates, through its subsidiaries, namely Jersey Shore State Bank (JSSB) and Luzerne Bank (Luzerne) (the Banks). The Banks are engaged in commercial and retail banking. The Services offered by the Banks include accepting time, demand and savings deposits including Super NOW accounts, statement savings accounts, money market accounts, and fixed rate certificates of deposit. Its other services also include making secured and unsecured business and consumer loans that include financing commercial transactions as well as construction and residential mortgage loans and revolving credit loans with overdraft protection. The Bank's loan portfolio includes commercial and agricultural, real estate, and consumer. Its subsidiaries also include Woods Real Estate Development Co., Inc., Woods Investment Company, Inc., The M Group Inc. and United Insurance Solutions, LLC.

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.

Penns Woods Bancorp, Inc. has a Value Score of 78, which is considered to be undervalued.

Penns Woods Bancorp, Inc.’s price-earnings ratio is 9.5 compared to the industry median at 8.1. This means that it has a higher price relative to its earnings compared to its peers. This makes Penns Woods Bancorp, Inc. less attractive for value investors.

Penns Woods Bancorp, Inc.’s price-to-book ratio is lower than its peers. This could make Penns Woods Bancorp, Inc. more attractive for value investors when compared to the industry median at 0.94.

You can read more about Penns Woods 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 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.

• Bankinter SA - ADR stock has a Value Grade of B.
• Bank of Nova Scotia stock has a Value Grade of B.
• Financial Institutions Inc stock has a Value Grade of A.
• Live Oak Bancshares Inc stock has a Value Grade of B.
• MainStreet Bancshares Inc stock has a Value Grade of A.
• Penns Woods Bancorp, Inc. 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 Monday, April 17
• Which Is a Better Investment, Columbia Financial Inc or First Horizon Corp Stock?
• 7 Undervalued Banks Stocks for Friday, April 14
• Why CVB Financial Corp.’s (CVBF) Stock Is Down 4.16%

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.