Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 4 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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4 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 4 undervalued stocks in the Banks industry for Friday, June 16, 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.

Broadway Financial Corp’s Value Grade

Value Grade:

Broadway Financial Corporation is a bank holding company. The Company conducts its operations through its wholly owned banking subsidiary, City First Bank (the Bank). The Bank is a community-oriented bank in Southern California and in the Washington, D.C. market serving low-to-moderate income communities. The Bank?s business consists of attracting deposits from the general public in the areas surrounding its branch offices, loan customers, large non-profit entities, local municipalities, and depositors. The Bank offers a variety of residential and commercial real estate loan products for consumers, businesses, and non-profit organizations. Its loan portfolio consists of mortgage loans, commercial business loans, loans guaranteed by the Small Business Administration and construction-to-permanent loans. It also offers a variety of deposit products, including savings accounts, checking accounts, interest checking accounts, money market accounts and fixed-term certificates of deposit.

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.

Broadway Financial Corp has a Value Score of 66, which is considered to be undervalued.

When you look at Broadway Financial Corp’s price-to-sales ratio at 1.91 compared to the industry median at 2.21, this company has a lower price relative to revenue compared to its peers. This could make Broadway Financial Corp’s stock more attractive for value investors.

Broadway Financial Corp’s price-earnings ratio is 12.38 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 Broadway Financial Corp less attractive for value investors.

Now, let’s assess Broadway Financial Corp’s EV/EBITDA ratio, also known as enterprise multiple. At 17.0, when compared to the industry median of 5.7, the company may be considered overvalued 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. Broadway Financial Corp’s shareholder yield is lower than its industry median ratio of 3.92%. 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. Broadway Financial Corp’s price-to-book ratio is lower than its industry median ratio of 0.91. This could make Broadway Financial Corp more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Broadway 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. Broadway Financial Corp’s price-to-free-cash-flow ratio is lower than its industry median ratio of 7.83. This could make Broadway Financial Corp more attractive because the lower P/FCF ratio indicates that Broadway 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.

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 69, which is considered to be undervalued.

Jeffersonville Bancorp’s price-earnings ratio is 8.0 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 Jeffersonville Bancorp fairly 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 0.91.

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.

Oconee Financial Corp’s Value Grade

Value Grade:

Oconee Financial Corporation is a bank holding company. The Company, through its subsidiary, Oconee State Bank (Bank), provides banking services. The Bank operates as a community oriented, full-service commercial bank. The Bank has approximately four full-service banking offices and five automated teller machines (ATMs). The Bank is focused on retail and small business banking. The Bank offers customary banking services such as consumer and commercial checking accounts, NOW accounts, money market accounts, savings accounts, certificates of deposit, individual retirement accounts, safe deposit facilities, and money transfers. The Bank finances commercial and consumer transactions, makes secured and unsecured loans, offers lines of credit, Visitors International Stay Admission (VISA) and MasterCard accounts, and provides a variety of other banking 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.

Oconee Financial Corp has a Value Score of 88, which is considered to be undervalued.

Oconee Financial Corp’s price-earnings ratio is 6.5 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 Oconee Financial Corp more attractive for value investors.

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

You can read more about Oconee 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.

US Bancorp’s Value Grade

Value Grade:

U.S. Bancorp is a financial service holding company. It provides a range of financial services, including lending and depository services, cash management, capital markets, and trust and investment management services. It also engages in credit card services, merchant and automated teller machine processing, mortgage banking, insurance, brokerage and leasing. Its banking subsidiaries, U.S. Bank National Association and MUFG Union Bank, N.A., are engaged in the general banking business and offer commercial and consumer lending services, lending services, depository services and ancillary services. Its non-banking subsidiaries offer investment and insurance products to its customers principally within its domestic markets, and fund administration services to a broad range of mutual and other funds. Its lines of business are Corporate and Commercial Banking, Consumer and Business Banking, Wealth Management and Investment Services, Payment Services, and Treasury and Corporate Support.

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.

US Bancorp has a Value Score of 84, which is considered to be undervalued.

US Bancorp’s price-earnings ratio is 8.9 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 US Bancorp less attractive for value investors.

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

You can read more about US 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.

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 4 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.

• Broadway Financial Corp stock has a Value Grade of B.
• Jeffersonville Bancorp stock has a Value Grade of B.
• Oconee Financial Corp stock has a Value Grade of A.
• US Bancorp stock has a Value Grade of A.

Now that you have a bit more background about each of the 4 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.

• 4 Undervalued Banks Stocks for Friday, June 16
• Which Is a Better Investment, Atlantic Union Bankshares Corp or Banco Itau Chile (ADR) Stock?
• Which Is a Better Investment, First Financial Bancorp or Banco Itau Chile (ADR) Stock?
• 5 Undervalued Banks Stocks for Thursday, June 15

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.