Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 3 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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3 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 3 undervalued stocks in the Banks industry for Friday, May 05, 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.

Auburn National Bancorporation Inc’s Value Grade

Value Grade:

Auburn National Bancorporation, Inc. is a bank holding company. The Company?s business is conducted primarily through AuburnBank (the Bank) and its subsidiaries. The Bank is a commercial bank located in Auburn, Alabama. The Bank offers checking, savings, transaction deposit accounts and certificates of deposit, and it is an active residential mortgage lender in its primary service area. The Bank?s primary service area includes the cities of Auburn and Opelika, Alabama, and nearby surrounding areas in East Alabama, primarily in Lee County. The Bank also offers commercial, financial, agricultural, real estate construction and consumer loan products and other financial services. The Bank is a provider of automated teller machine (ATM) services in East Alabama and operates ATM machines in about 13 locations in its primary service area. The Bank offers online banking, bill payment and other electronic banking services through its Internet Website, www.auburnbank.com.

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.

Auburn National Bancorporation Inc has a Value Score of 78, which is considered to be undervalued.

When you look at Auburn National Bancorporation Inc’s price-to-sales ratio at 2.63 compared to the industry median at 2.02, this company has a higher price relative to revenue compared to its peers. This could make Auburn National Bancorporation Inc’s stock less attractive for value investors.

Auburn National Bancorporation Inc’s price-earnings ratio is 7.51 compared to the industry median at 7.26. This means it has a higher share price relative to earnings compared to its peers. This could make Auburn National Bancorporation Inc less attractive for value investors.

Now, let’s assess Auburn National Bancorporation Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 4.8, 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. Auburn National Bancorporation Inc’s shareholder yield is higher than its industry median ratio of 4.37%. 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. Auburn National Bancorporation Inc’s price-to-book ratio is higher than its industry median ratio of 0.84. This could make Auburn National Bancorporation Inc less attractive to investors looking for a new addition to their portfolio.

River Financial Corp’s Value Grade

Value Grade:

River Financial Corporation is a bank holding company. The Company operates, through its subsidiary, River Bank & Trust (the Bank). The Bank provides an array of financial services to businesses, business owners, and professionals. Through its Bank, the Company is engaged in the business of banking, which consists primarily of accepting deposits from the public and making loans and other investments. It offers a range of lending services, including real estate, consumer, and commercial loans, to individuals, small businesses, and other organizations located in or conducting a substantial portion of their business in its market areas. It originates residential loans for sale into the secondary market. The Bank offers electronic banking services to its customers, including commercial and retail online banking, automated bill payment, mobile banking, and remote deposit capture for certain customers. The Bank operates approximately 21 full-service banking offices.

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.

River Financial Corp has a Value Score of 78, which is considered to be undervalued.

River Financial Corp’s price-earnings ratio is 7.4 compared to the industry median at 7.3. This means that it has a higher price relative to its earnings compared to its peers. This makes River Financial Corp less attractive for value investors.

River Financial Corp’s price-to-book ratio is lower than its peers. This could make River Financial Corp more attractive for value investors when compared to the industry median at 0.84.

You can read more about River 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.

TrustCo Bank Corp NY’s Value Grade

Value Grade:

TrustCo Bank Corp NY is a savings and loan holding company. The Company?s principal subsidiary is Trustco Bank (the Bank). The Bank is a federal savings bank engaged in providing general banking services to individuals and businesses. The Bank operates over 158 automatic teller machines and approximately 143 banking offices in Albany, Columbia, Dutchess, Greene, Montgomery, Orange, Putnam, Rensselaer, Rockland, Saratoga, Schenectady, Schoharie, Ulster, Warren, Washington, and Westchester counties of New York, Brevard, Charlotte, Flagler, Hillsborough, Indian River, Lake, Manatee, Martin, Orange, Osceola, Palm Beach, Polk, Sarasota, Seminole, and Volusia counties in Florida, Bennington County in Vermont, Berkshire County in Massachusetts and Bergen County in New Jersey. Its business also consists of accepting deposits and making loans and investments. The Bank also lends in Essex and Fulton counties, Passaic counties, and Sumter counties, where it has no branch locations.

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.

TrustCo Bank Corp NY has a Value Score of 70, which is considered to be undervalued.

TrustCo Bank Corp NY’s price-earnings ratio is 7.1 compared to the industry median at 7.3. This means that it has a lower price relative to its earnings compared to its peers. This makes TrustCo Bank Corp NY more attractive for value investors.

TrustCo Bank Corp NY’s price-to-book ratio is lower than its peers. This could make TrustCo Bank Corp NY more attractive for value investors when compared to the industry median at 0.84.

You can read more about TrustCo Bank Corp NY’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 3 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.

• Auburn National Bancorporation Inc stock has a Value Grade of B.
• River Financial Corp stock has a Value Grade of B.
• TrustCo Bank Corp NY stock has a Value Grade of B.

Now that you have a bit more background about each of the 3 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.

• 3 Undervalued Banks Stocks for Friday, May 05
• 4 Undervalued Banks Stocks for Thursday, May 04
• Is Banco Itau Chile (ADR) (ITCL) a Good Dividend Stock?
• Is First Republic Bank (FRCB) a Good Dividend Stock?

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.