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 Thursday, April 20, 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.

Banco de Chile (ADR)’s Value Grade

Value Grade:

Banco de Chile is a full service financial institution, which is engaged in providing credit and non-credit products and services in Chile. The Bank offers a range of banking services to its customers, ranging from individuals to corporations. The Bank's segments include Retail, which focuses on individuals and small and medium-sized companies, where the product offering focuses on consumer loans, commercial loans, checking accounts, credit cards, credit lines and mortgage loans; Wholesale, which focuses on corporate clients and companies, where the product offering focuses on commercial loans, checking accounts and liquidity management services, debt instruments, foreign trade, derivative contracts and leases; Treasury, which includes the associated revenues to the management of the investment portfolio and the business of financial transactions and currency trading, and Subsidiaries, which corresponds to companies and corporations controlled by the Bank.

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.

Banco de Chile (ADR) has a Value Score of 84, which is considered to be undervalued.

When you look at Banco de Chile (ADR)’s price-to-sales ratio at 1.82 compared to the industry median at 2.44, this company has a lower price relative to revenue compared to its peers. This could make Banco de Chile (ADR)’s stock more attractive for value investors.

Banco de Chile (ADR)’s price-earnings ratio is 5.74 compared to the industry median at 8.18. This means it has a lower share price relative to earnings compared to its peers. This could make Banco de Chile (ADR) more attractive for value investors.

Now, let’s assess Banco de Chile (ADR)’s EV/EBITDA ratio, also known as enterprise multiple. At 6.4, when compared to the industry median of 6.7, 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. Banco de Chile (ADR)’s shareholder yield is higher than its industry median ratio of 3.80%. 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. Banco de Chile (ADR)’s price-to-book ratio is higher than its industry median ratio of 0.95. This could make Banco de Chile (ADR) less attractive to investors looking for a new addition to their portfolio.

Bank of East Asia Ltd (ADR)’s Value Grade

Value Grade:

Bank of East Asia Ltd is a company mainly engaged in the banking business. The Company operates its business through nine segments. The Mainland China Operations segment mainly include the back office unit for Mainland China operations in Hong Kong, all subsidiaries and associates operating in Mainland China, except those subsidiaries carrying out data processing and other back office operations for Hong Kong operations in Mainland China. The Corporate Banking segment provides corporate lending and loan syndication, asset-based lending, commercial lending, securities lending and trade financing activities with correspondent banks and corporates. The Personal Banking segment is engaged in the branch operations, personal internet banking, consumer finance, property loans and credit card business to individual customers. The Overseas Operations segment provides back office unit for overseas banking operations in Hong Kong, Macau Branch, Taiwan Branch and all branches, subsidiaries and ass

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 East Asia Ltd (ADR) has a Value Score of 97, which is considered to be undervalued.

Bank of East Asia Ltd (ADR)’s price-earnings ratio is 7.2 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 Bank of East Asia Ltd (ADR) more attractive for value investors.

Bank of East Asia Ltd (ADR)’s price-to-book ratio is higher than its peers. This could make Bank of East Asia Ltd (ADR) less attractive for value investors when compared to the industry median at 0.95.

You can read more about Bank of East Asia Ltd (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.

Bank of Hawaii Corp’s Value Grade

Value Grade:

Bank of Hawaii Corporation is a bank holding company. It provides a range of financial products and services primarily to customers in Hawaii, Guam, and other Pacific Islands. It operates through three segments: Consumer Banking, Commercial Banking, and Treasury and Other. The Consumer Banking segment provides loan, deposit, and insurance products; private banking and international client banking services; trust services; investment management, and institutional investment advisory services. It also provides a full-service brokerage offering equities, mutual funds, life insurance, and annuity products. The Commercial Banking segment offers products, including corporate banking, commercial real estate loans, commercial lease financing, auto dealer financing, and deposit products. The Treasury and Other segment consists of corporate asset and liability management activities, including interest rate risk management and a foreign currency exchange business.

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 Hawaii Corp has a Value Score of 61, which is considered to be undervalued.

Bank of Hawaii Corp’s price-earnings ratio is 9.1 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 Hawaii Corp less attractive for value investors.

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

You can read more about Bank of Hawaii 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 Community Bankshares Inc’s Value Grade

Value Grade:

First Community Bankshares, Inc. is a financial holding company, which provides banking products and services through its wholly owned subsidiary First Community Bank (the Bank). The Company has three segments. Commercial loans segment consists of loans to small and mid-size industrial, commercial, and service companies. Commercial real estate projects represent a variety of sectors of the commercial real estate market, including single family and apartment lessors, commercial real estate lessors, and hotel/motel operators. Consumer real estate loans segment consists of largely of loans to individuals within its market footprint for home equity loans and lines of credit and for the purpose of financing residential properties. Consumer and other loans segment consist of loans to individuals within its market footprint that include, but are not limited to, automobile, credit cards, personal lines of credit, boats, mobile homes, and other consumer goods.

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 Community Bankshares Inc has a Value Score of 76, which is considered to be undervalued.

First Community Bankshares Inc’s price-earnings ratio is 8.6 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 First Community Bankshares Inc less attractive for value investors.

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

You can read more about First Community Bankshares 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.

Pinnacle Bancshares, Inc.’s Value Grade

Value Grade:

Pinnacle Bancshares, Inc. is a bank holding company whose principal activity is the ownership and management of its subsidiary, Pinnacle Bank. The Bank is primarily in the business of obtaining funds in the form of various savings, demand deposit, and time deposit products and investing those funds in mortgage, consumer, and commercial loans. The Bank operates in approximately seven offices in the central and northwest portions of Alabama and originates its loans in this market area. The Company offers various types of real estate loan products, including Commercial real estate mortgage loans, Loans for real estate construction and development, Residential mortgage loans and Other real estate mortgage loans. Its commercial non-real estate loan portfolio segment includes commercial, financial, agricultural, and municipal tax free loans. Its Securities available for sale include Municipal securities, Corporate securities and Mortgage-backed securities.

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.

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

Pinnacle Bancshares, Inc.’s price-earnings ratio is 4.6 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 Pinnacle Bancshares, Inc. more attractive for value investors.

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

You can read more about Pinnacle 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.

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.

• Banco de Chile (ADR) stock has a Value Grade of A.
• Bank of East Asia Ltd (ADR) stock has a Value Grade of A.
• Bank of Hawaii Corp stock has a Value Grade of B.
• First Community Bankshares Inc stock has a Value Grade of B.
• Pinnacle Bancshares, Inc. stock has a Value Grade of A.

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 Thursday, April 20
• 4 Undervalued Banks Stocks for Wednesday, April 19
• Why Axos Financial Inc’s (AX) Stock Is Up 4.06%
• Why Banc of California Inc’s (BANC) Stock Is Up 4.37%

AAII Disclaimer

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