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 Monday, June 19, 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.

Grupo Aval Acciones y Valores SA - ADR’s Value Grade

Value Grade:

Grupo Aval Acciones y Valores SA is a Colombia-based holding company primarily engaged, through its subsidiaries, in the acquisition, purchase and sale of stocks, bonds and other securities of companies active in the financial sector. The Company provides a variety of financial services and products across the Colombian market, ranging from traditional banking services, such as loans and deposits to pension and severance fund management, as well as the provision of legal representation services. The Company owns such subsidiaries as Banco de Bogota SA, Banco Popular SA, among others. Additionally, through its indirect and direct investments in other companies, the Company is present in the activities of investment baking and investments in the real sector, as well as the administrator of pension and severance funds in Colombia.

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.

Grupo Aval Acciones y Valores SA - ADR has a Value Score of 70, which is considered to be undervalued.

When you look at Grupo Aval Acciones y Valores SA - ADR’s price-to-sales ratio at 0.52 compared to the industry median at 2.18, this company has a lower price relative to revenue compared to its peers. This could make Grupo Aval Acciones y Valores SA - ADR’s stock more attractive for value investors.

Grupo Aval Acciones y Valores SA - ADR’s price-earnings ratio is 6.06 compared to the industry median at 8.01. This means it has a lower share price relative to earnings compared to its peers. This could make Grupo Aval Acciones y Valores SA - ADR more attractive for value investors.

Now, let’s assess Grupo Aval Acciones y Valores SA - ADR’s EV/EBITDA ratio, also known as enterprise multiple. At 9.7, 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. Grupo Aval Acciones y Valores SA - ADR’s shareholder yield is lower than its industry median ratio of 3.90%. 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. Grupo Aval Acciones y Valores SA - ADR’s price-to-book ratio is lower than its industry median ratio of 0.89. This could make Grupo Aval Acciones y Valores SA - ADR more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Grupo Aval Acciones y Valores SA - ADR’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Grupo Aval Acciones y Valores SA - ADR’s price-to-free-cash-flow ratio is higher than its industry median ratio of 7.87. This could make Grupo Aval Acciones y Valores SA - ADR less attractive because the higher P/FCF ratio indicates that Grupo Aval Acciones y Valores SA - ADR 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.

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 74, which is considered to be undervalued.

First Community Bankshares Inc’s price-earnings ratio is 10.2 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 First Community Bankshares Inc less attractive for value investors.

First Community Bankshares Inc’s price-to-book ratio is lower than its peers. This could make First Community Bankshares Inc more attractive for value investors when compared to the industry median at 0.89.

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.

Farmers And Merchants Bank of Long Beach’s Value Grade

Value Grade:

Farmers & Merchants Bank of Long Beach (the Bank) is a state-chartered bank that offers a range of banking products and services to individuals, professionals and small to medium-sized businesses. The Bank operates 25 branches in California’s Los Angeles County, Orange County and Santa Barbara County, as well as through online and mobile banking platforms. The Bank as commercial bank, offers a range of banking products and services, including accepting demand, money market, savings, and time deposits; originating loans, including commercial real estate loans, construction loans, and commercial business loans; and providing other business-oriented banking products and services. It also provides financing for residential loans, including single-family and multifamily loans. The Bank's loan portfolio consists of commercial and industrial, construction, commercial real estate, residential mortgage, equity lines, and installment and other loans. It also provides treasury management.

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.

Farmers And Merchants Bank of Long Beach has a Value Score of 75, which is considered to be undervalued.

Farmers And Merchants Bank of Long Beach’s price-earnings ratio is 6.6 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 Farmers And Merchants Bank of Long Beach more attractive for value investors.

Farmers And Merchants Bank of Long Beach’s price-to-book ratio is higher than its peers. This could make Farmers And Merchants Bank of Long Beach less attractive for value investors when compared to the industry median at 0.89.

You can read more about Farmers And Merchants Bank of Long Beach’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.

Fulton Financial Corp’s Value Grade

Value Grade:

Fulton Financial Corporation is a financial holding company. The Company operates through its banking subsidiary, Fulton Bank (the Bank). The Bank offers financial services primarily within its five-state market area, comprised of Pennsylvania, Delaware, Maryland, New Jersey and Virginia. It offers a range of consumer and commercial banking products and services in its market area. Its consumer banking products and services include various checking account and savings deposit products and certificates of deposit. Its consumer loan products include automobile loans, personal lines of credit and checking account overdraft protection. It offers residential mortgages through Fulton Mortgage Company, an operating division of the Bank. Its commercial lending products include commercial real estate loans, commercial and industrial loans, construction loans and equipment lease financing loans. It also offers wealth management services through Fulton Financial Advisors and Fulton Private 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.

Fulton Financial Corp has a Value Score of 83, which is considered to be undervalued.

Fulton Financial Corp’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 Fulton Financial Corp more attractive for value investors.

Fulton Financial Corp’s price-to-book ratio is lower than its peers. This could make Fulton Financial Corp fairly attractive for value investors when compared to the industry median at 0.89.

You can read more about Fulton 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.

Midland States Bancorp Inc’s Value Grade

Value Grade:

Midland States Bancorp, Inc. is a diversified financial holding company. Its segments include Banking, Wealth Management, and Other. The Banking segment provides a range of financial products and services to consumers and businesses, including commercial, commercial real estate, mortgage and other consumer loan products; commercial equipment financing; mortgage loan sales and servicing; letters of credit; various types of deposit products, including checking, savings and time deposit accounts; merchant services; and corporate treasury management services. The Wealth Management segment operates under the name Midland Wealth Management, which consists of trust and wealth management products and services, including financial and estate planning, trustee and custodial services, investment management, tax and insurance planning, business planning, corporate retirement plan consulting and administration and retail brokerage services through a nationally recognized third party broker dealer.

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.

Midland States Bancorp Inc has a Value Score of 96, which is considered to be undervalued.

Midland States Bancorp Inc’s price-earnings ratio is 5.1 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 Midland States Bancorp Inc more attractive for value investors.

Midland States Bancorp Inc’s price-to-book ratio is higher than its peers. This could make Midland States Bancorp Inc less attractive for value investors when compared to the industry median at 0.89.

You can read more about Midland States 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.

Unity Bancorp, Inc.’s Value Grade

Value Grade:

Unity Bancorp, Inc. is a bank holding company that serves as a holding company for Unity Bank (the Bank). The Company's primary business is ownership and supervision of the Bank. The Company, through the Bank, conducts a traditional and community-oriented commercial banking business and offers services, including personal and business checking accounts, time deposits, money market accounts and regular savings accounts. The Company engages in a range of lending activities and offers commercial, small business administration (SBA), consumer, mortgage, home equity and personal loans. The Bank is a full-service commercial bank, providing a range of business and consumer financial services through its office in Clinton, New Jersey and sixteen additional New Jersey branches located in Edison, Emerson, Flemington, Highland Park, Lakewood, Linden, Middlesex, North Plainfield, Phillipsburg, Scotch Plains, Somerset, Somerville, South Plainfield, Union, Washington and Whitehouse.

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.

Unity Bancorp, Inc. has a Value Score of 82, which is considered to be undervalued.

Unity Bancorp, Inc.’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 Unity Bancorp, Inc. more attractive for value investors.

Unity Bancorp, Inc.’s price-to-book ratio is lower than its peers. This could make Unity Bancorp, Inc. more attractive for value investors when compared to the industry median at 0.89.

You can read more about Unity 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.

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.

• Grupo Aval Acciones y Valores SA - ADR stock has a Value Grade of B.
• First Community Bankshares Inc stock has a Value Grade of B.
• Farmers And Merchants Bank of Long Beach stock has a Value Grade of B.
• Fulton Financial Corp stock has a Value Grade of A.
• Midland States Bancorp Inc stock has a Value Grade of A.
• Unity Bancorp, Inc. stock has a Value Grade of A.

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 Monday, June 19
• 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?

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.