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 Thursday, June 08, 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.

Pathward Financial Inc’s Value Grade

Value Grade:

Pathward Financial, Inc. is a financial holding company, which operates through its subsidiary, Pathward, N.A. (the Bank). The Bank is a full-service banking company. The Bank operates through three segments: Consumer, Commercial and Corporate Services/Other. The Consumer segment includes the backend as a service (BaaS) business line, which collaborates with partners to navigate payment and lending needs. It provides prepaid cards, deposit accounts, payment processing and consumer lending. The Commercial segment includes the Company's commercial finance business line, which helps businesses access the funds they need. Its commercial financial products range is available through the four lending solutions: working capital, equipment finance, structured finance and insurance premium finance. The Corporate Services/Other segment includes certain shared services, as well as treasury-related functions, such as the investment portfolio, warehouse finance, wholesale deposits and borrowings.

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.

Pathward Financial Inc has a Value Score of 71, which is considered to be undervalued.

When you look at Pathward Financial Inc’s price-to-sales ratio at 4.00 compared to the industry median at 2.21, this company has a higher price relative to revenue compared to its peers. This could make Pathward Financial Inc’s stock less attractive for value investors.

Pathward Financial Inc’s price-earnings ratio is 11.14 compared to the industry median at 8.02. This means it has a higher share price relative to earnings compared to its peers. This could make Pathward Financial Inc less attractive for value investors.

Now, let’s assess Pathward Financial Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 3.2, when compared to the industry median of 5.8, 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. Pathward Financial Inc’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. Pathward Financial Inc’s price-to-book ratio is higher than its industry median ratio of 0.91. This could make Pathward Financial Inc less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Pathward Financial Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Pathward Financial Inc’s price-to-free-cash-flow ratio is higher than its industry median ratio of 8.03. This could make Pathward Financial Inc less attractive because the higher P/FCF ratio indicates that Pathward Financial Inc 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.

Commerzbank AG (ADR)’s Value Grade

Value Grade:

Commerzbank is a Germany-based international commercial bank with branches and offices in nearly 50 countries. The Bank’s two business segments Private and Small-Business Customers and Corporate Clients offer a portfolio of financial services to their customers’ needs. The Bank offers its sector expertise to its corporate clients in Germany and abroad and is a provider of capital market products. Its subsidiary mBank in Poland is an digital bank. The integration of Comdirect enables Commerzbank to combine the services of Germany’s online banks with a personal advisory offering at local level. The Bank serves private and small-business customers nationwide and corporate clients, multinationals, financial service providers, and institutional clients worldwide. Its Polish subsidiary mBank S.A. operates in Poland, but also in the Czech Republic and Slovakia.

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.

Commerzbank AG (ADR) has a Value Score of 94, which is considered to be undervalued.

Commerzbank AG (ADR)’s price-earnings ratio is 8.1 compared to the industry median at 8.0. This means that it has a higher price relative to its earnings compared to its peers. This makes Commerzbank AG (ADR) less attractive for value investors.

Commerzbank AG (ADR)’s price-to-book ratio is higher than its peers. This could make Commerzbank AG (ADR) less attractive for value investors when compared to the industry median at 0.91.

You can read more about Commerzbank AG (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.

Eagle Bancorp Inc’s Value Grade

Value Grade:

Eagle Bancorp, Inc. is a bank holding company for EagleBank (the Bank). The Bank is a chartered commercial bank, which conducts a full-service community banking business, primarily in Northern Virginia, Cyland, and Washington, D.C. The primary financial services offered by the Bank include real estate, commercial and consumer lending, as well as traditional deposit and repurchase agreement products. The Bank is also active in the origination and sale of residential mortgage loans, the origination of small business loans, and the origination, securitization and sale of multifamily Federal Housing Administration (FHA) loans. The Bank offers its products and services through approximately 16 banking offices, five lending centers and various electronic capabilities, including remote deposit services and mobile banking services. The Bank has three active direct subsidiaries: Bethesda Leasing, LLC, Eagle Insurance Services, LLC, and Landroval Municipal Finance, Inc.

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.

Eagle Bancorp Inc has a Value Score of 94, which is considered to be undervalued.

Eagle Bancorp Inc’s price-earnings ratio is 6.4 compared to the industry median at 8.0. This means that it has a lower price relative to its earnings compared to its peers. This makes Eagle Bancorp Inc more attractive for value investors.

Eagle Bancorp Inc’s price-to-book ratio is higher than its peers. This could make Eagle Bancorp Inc less attractive for value investors when compared to the industry median at 0.91.

You can read more about Eagle 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.

Heritage Commerce Corp.’s Value Grade

Value Grade:

Heritage Commerce Corp is a bank holding company for its wholly owned subsidiary Heritage Bank of Commerce (the Bank). It offers a range of range of commercial and personal banking services to residents and the business/professional community in Alameda, Contra Costa, Marin, San Benito, San Francisco, San Mateo, and Santa Clara counties of California. It operates through two segments: Banking segment and Factoring segment. Its loan portfolio includes commercial and industrial loans; commercial real estate loans; construction loans; and small business administration (SBA) loans. It also offers home equity lines of credit. It provides non-interest-bearing demand, interest bearing demand, and money market accounts. It offers certificates of deposit and savings accounts. It provides other products and services, such as bank by mail, night depositories, safe deposit boxes, automated payroll services, electronic funds transfers, online bill pay, and homeowner association 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.

Heritage Commerce Corp. has a Value Score of 84, which is considered to be undervalued.

Heritage Commerce Corp.’s price-earnings ratio is 7.2 compared to the industry median at 8.0. This means that it has a lower price relative to its earnings compared to its peers. This makes Heritage Commerce Corp. more attractive for value investors.

Heritage Commerce Corp.’s price-to-book ratio is higher than its peers. This could make Heritage Commerce Corp. less attractive for value investors when compared to the industry median at 0.91.

You can read more about Heritage Commerce 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.

PB Bankshares Inc’s Value Grade

Value Grade:

PB Bankshares, Inc. is a bank holding company for Presence Bank (the Bank). Its principal business consists of attracting retail and commercial deposits from the general public in its market area and investing those deposits, together with funds generated from operations and borrowings, primarily in commercial real estate loans, commercial and industrial loans, construction, home equity lines of credit and to a lesser extent, one- to four-family residential real estate loans and consumer loans. It offers a variety of deposit accounts, including demand deposit accounts, savings accounts, money market accounts and certificates of deposit accounts. Its community-oriented bank offers a variety of financial products and services to meet the needs of its customers. Its market area for deposits includes the communities in which it maintains its banking office locations, while its lending market area is broader and includes customers in Lebanon, Dauphin and Cumberland Counties in Pennsylvania.

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.

PB Bankshares Inc has a Value Score of 70, which is considered to be undervalued.

PB Bankshares Inc’s price-earnings ratio is 13.3 compared to the industry median at 8.0. This means that it has a higher price relative to its earnings compared to its peers. This makes PB Bankshares Inc less attractive for value investors.

PB Bankshares Inc’s price-to-book ratio is higher than its peers. This could make PB Bankshares Inc less attractive for value investors when compared to the industry median at 0.91.

You can read more about PB 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.

United Bancorp Inc’s Value Grade

Value Grade:

United Bancorp, Inc. is a bank holding company. The Company has one wholly owned subsidiary bank, Unified Bank, Martins Ferry, Ohio (the Bank). The Bank serves customers in northeastern, eastern, southeastern and south-central Ohio and the Northern panhandle of West Virginia and is engaged in the business of commercial and retail banking in Belmont, Harrison, Jefferson, Tuscarawas, Carroll, Athens, Hocking, and Fairfield counties and the surrounding localities. The bank also operates in Marshall County West Virginia. The Bank provides a range of banking and financial services, which includes accepting demand, savings and time deposits and granting commercial, real estate and consumer loans. The Bank's loan portfolio includes commercial loans, commercial real estate loans, residential real estate loans and installment loans. The Bank conducts its business through its main office and standalone operations center in Martins Ferry, Ohio and about 19 branches located in the counties.

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.

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

United Bancorp Inc’s price-earnings ratio is 7.7 compared to the industry median at 8.0. This means that it has a lower price relative to its earnings compared to its peers. This makes United Bancorp Inc more attractive for value investors.

United Bancorp Inc’s price-to-book ratio is lower than its peers. This could make United Bancorp Inc more attractive for value investors when compared to the industry median at 0.91.

You can read more about United 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.

Wayne Savings Bancshares, Inc’s Value Grade

Value Grade:

Wayne Savings Bancshares, Inc. operates as the holding company for Wayne Savings Community Bank (the Bank) that provides personal and business banking products and services to individuals, businesses, and other organizations. The Company offers checking, savings, money market, and term certificate accounts, as well as certificates of deposit. It also provides residential mortgage, commercial, installment, residential and nonresidential real estate, commercial real estate, residential construction, multi-family real estate, land, commercial business, consumer, home, home equity, auto, recreational vehicle, personal, furniture and appliance, agriculture, and term loans, as well as lines of credit, government guaranteed programs, and standby letters of credit. In addition, the Bank offers financial planning, retirement planning, investment advisory, insurance, and wealth management and trust services. It operates in approximately 13 banking 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.

Wayne Savings Bancshares, Inc has a Value Score of 87, which is considered to be undervalued.

Wayne Savings Bancshares, Inc’s price-earnings ratio is 6.3 compared to the industry median at 8.0. This means that it has a lower price relative to its earnings compared to its peers. This makes Wayne Savings Bancshares, Inc more attractive for value investors.

Wayne Savings Bancshares, Inc’s price-to-book ratio is lower than its peers. This could make Wayne Savings Bancshares, Inc more attractive for value investors when compared to the industry median at 0.91.

You can read more about Wayne Savings 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 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.

• Pathward Financial Inc stock has a Value Grade of B.
• Commerzbank AG (ADR) stock has a Value Grade of A.
• Eagle Bancorp Inc stock has a Value Grade of A.
• Heritage Commerce Corp. stock has a Value Grade of A.
• PB Bankshares Inc stock has a Value Grade of B.
• United Bancorp Inc stock has a Value Grade of B.
• Wayne Savings Bancshares, 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 Thursday, June 08
• Is Century Financial Corp PA (CYFL) Stock a Good Investment?
• Is Skyline Bankshares Inc (SLBK) Stock a Good Investment?
• Which Is a Better Investment, Ameris Bancorp or Grupo Aval Acciones y Valores SA - ADR Stock?

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