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 Friday, April 28, 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.

Central Pacific Financial Corp.’s Value Grade

Value Grade:

Central Pacific Financial Corp. is the bank holding company of Central Pacific Bank (the Bank). The Bank is a commercial bank, which offers a range of banking products and services, including accepting time and demand deposits and originating loans. The Company offers a range of banking services and products to businesses, professionals and individuals. Its loans include commercial loans, construction loans, commercial and residential mortgage loans and consumer loans. Its investment securities portfolio includes mortgage-backed securities (MBS), other debt securities and equity securities. Its MBS portfolio is comprised primarily of residential MBS issued by United States government entities and agencies. It also offers wealth management products and services, such as non-deposit investment products, annuities, insurance, investment management, asset custody and general consultation and planning services.

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.

Central Pacific Financial Corp. has a Value Score of 89, which is considered to be undervalued.

When you look at Central Pacific Financial Corp.’s price-to-sales ratio at 1.75 compared to the industry median at 2.28, this company has a lower price relative to revenue compared to its peers. This could make Central Pacific Financial Corp.’s stock more attractive for value investors.

Central Pacific Financial Corp.’s price-earnings ratio is 6.15 compared to the industry median at 7.86. This means it has a lower share price relative to earnings compared to its peers. This could make Central Pacific Financial Corp. more attractive for value investors.

Now, let’s assess Central Pacific Financial Corp.’s EV/EBITDA ratio, also known as enterprise multiple. At 6.6, when compared to the industry median of 6.9, 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. Central Pacific Financial Corp.’s shareholder yield is higher than its industry median ratio of 4.02%. 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. Central Pacific Financial Corp.’s price-to-book ratio is higher than its industry median ratio of 0.92. This could make Central Pacific Financial Corp. less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Central Pacific Financial Corp.’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Central Pacific Financial Corp.’s price-to-free-cash-flow ratio is lower than its industry median ratio of 7.43. This could make Central Pacific Financial Corp. more attractive because the lower P/FCF ratio indicates that Central Pacific Financial 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.

Capstar Financial Holdings Inc’s Value Grade

Value Grade:

CapStar Financial Holdings, Inc. is a bank holding company. The Company operates primarily through its wholly owned subsidiary, CapStar Bank (the Bank). The Bank's products and services include commercial banking that offers a full range of banking services to businesses and professionals, including deposit and savings accounts, treasury management services, as well as financing for commercial and industrial needs, owner-occupied real estate, construction and land development, and non-owner-occupied income producing real estate; consumer Banking that offers a range of banking services to individuals, including deposit and savings accounts as well as residential real estate loans, home equity loans, and other consumer loans some of which are sold in the secondary market, and Wealth Management that specializes in helping individuals develop sound retirement strategies. The Company?s commercial and industrial loans consist of loans to small to mid-sized businesses.

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.

Capstar Financial Holdings Inc has a Value Score of 68, which is considered to be undervalued.

Capstar Financial Holdings Inc’s price-earnings ratio is 8.2 compared to the industry median at 7.9. This means that it has a higher price relative to its earnings compared to its peers. This makes Capstar Financial Holdings Inc less attractive for value investors.

Capstar Financial Holdings Inc’s price-to-book ratio is higher than its peers. This could make Capstar Financial Holdings Inc less attractive for value investors when compared to the industry median at 0.92.

You can read more about Capstar Financial Holdings 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.

First Northern Community Bancorp’s Value Grade

Value Grade:

First Northern Community Bancorp is a bank holding company. It specializes in relationship banking. The Bank is engaged in the commercial banking business and provides a range of products and services to small- and medium-sized businesses and individuals, including accepting demand, interest-bearing transactions, savings, and time deposits, and making commercial, consumer and real estate related loans. It also issues cashier checks, rents safe deposit boxes, and provides other customary banking services. It has approximately 14 branches, including Dixon, Davis, West Sacramento, Fairfield, Vacaville, Winters, Woodland, Sacramento, Roseville, Auburn, Rancho Cordova, Colusa, Willows, and Orland. It offers paycheck protection programs, commercial real estate loans, business term loans, business lines of credit, lighting loans, and small business loans (SBA). It also provides business online banking and bill pay, business mobile banking, remote deposit capture, and merchant services.

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 Northern Community Bancorp has a Value Score of 81, which is considered to be undervalued.

First Northern Community Bancorp’s price-earnings ratio is 6.8 compared to the industry median at 7.9. This means that it has a lower price relative to its earnings compared to its peers. This makes First Northern Community Bancorp more attractive for value investors.

First Northern Community Bancorp’s price-to-book ratio is lower than its peers. This could make First Northern Community Bancorp more attractive for value investors when compared to the industry median at 0.92.

You can read more about First Northern Community Bancorp’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.

Intercorp Financial Services Inc’s Value Grade

Value Grade:

Intercorp Financial Services Inc is a Peru-based holding company and a provider of financial services. The Business is managed in four segments operated through subsidiaries: banking, insurance, wealth management and payments. The banking segment is run through Interbank with strategic focus on retail banking. The insurance segment operates through Interseguro, which is an insurance company with key focus on life and annuities in Peru. The wealth management segment operates through Inteligo Bank, Inteligo SAB and Interfondos, which together provide wealth management, private banking, financing, brokerage, advisory and other investment services focused on emerging investors. The payments are conducted via Izipay, which is a pillar for building payments ecosystem.

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.

Intercorp Financial Services Inc has a Value Score of 93, which is considered to be undervalued.

Intercorp Financial Services Inc’s price-earnings ratio is 5.7 compared to the industry median at 7.9. This means that it has a lower price relative to its earnings compared to its peers. This makes Intercorp Financial Services Inc more attractive for value investors.

Intercorp Financial Services Inc’s price-to-book ratio is lower than its peers. This could make Intercorp Financial Services Inc fairly attractive for value investors when compared to the industry median at 0.92.

You can read more about Intercorp Financial Services 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.

Jeffersonville Bancorp’s Value Grade

Value Grade:

Jeffersonville Bancorp is a bank holding company for Jeff Bank (the Bank). The Company's principal activity is the ownership of all outstanding shares of the Bank?s stock. It operates through community banking operations segment. The Bank is a commercial bank providing community banking services to individuals, small businesses, and local municipal governments primarily in Sullivan County, New York. The Bank maintains ten full-service branches in Sullivan and Orange County, New York located in Anawana Lake Road/Monticello, Eldred, Callicoon, Jeffersonville, Liberty, Livingston Manor, Monticello, Port Jervis, White Lake, and Wurtsboro.

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.

Jeffersonville Bancorp has a Value Score of 73, which is considered to be undervalued.

Jeffersonville Bancorp’s price-earnings ratio is 7.4 compared to the industry median at 7.9. This means that it has a lower price relative to its earnings compared to its peers. This makes Jeffersonville Bancorp more attractive for value investors.

Jeffersonville Bancorp’s price-to-book ratio is lower than its peers. This could make Jeffersonville Bancorp more attractive for value investors when compared to the industry median at 0.92.

You can read more about Jeffersonville Bancorp’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.

WesBanco Inc’s Value Grade

Value Grade:

Wesbanco, Inc. is a bank holding company of Wesbanco Bank, Inc. (the Bank). The Company offers a range of financial services, including retail banking, corporate banking, personal and corporate trust services, brokerage services, mortgage banking and insurance. It offers its services through two segments: Community Banking and Trust and Investment Services. Its Community Banking segment offers services traditionally offered by full-service commercial banks, including commercial demand, individual demand and time deposit accounts, as well as commercial, mortgage and individual installment loans, and certain non-traditional offerings, such as insurance and securities brokerage services. The Trust and Investment Services segment offers trust services, as well as various alternative investment products, including mutual funds. The Bank operates approximately 194 branches and 188 ATM machines in West Virginia, Ohio, western Pennsylvania, Kentucky, southern Indiana and Maryland.

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.

WesBanco Inc has a Value Score of 77, which is considered to be undervalued.

WesBanco Inc’s price-earnings ratio is 8.9 compared to the industry median at 7.9. This means that it has a higher price relative to its earnings compared to its peers. This makes WesBanco Inc less attractive for value investors.

WesBanco Inc’s price-to-book ratio is higher than its peers. This could make WesBanco Inc less attractive for value investors when compared to the industry median at 0.92.

You can read more about WesBanco 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.

• Central Pacific Financial Corp. stock has a Value Grade of A.
• Capstar Financial Holdings Inc stock has a Value Grade of B.
• First Northern Community Bancorp stock has a Value Grade of A.
• Intercorp Financial Services Inc stock has a Value Grade of A.
• Jeffersonville Bancorp stock has a Value Grade of B.
• WesBanco 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 Friday, April 28
• 6 Undervalued Banks Stocks for Thursday, April 27
• Is Northeast Indiana Bancorp Inc (NIDB) a Good Dividend Stock?
• Which Is a Better Investment, Ameris Bancorp or KeyCorp Stock?

AAII Disclaimer

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