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 26, 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.

Banc of California Inc’s Value Grade

Value Grade:

Banc of California, Inc. is a financial holding company. The Company operates through its subsidiary, Banc of California, National Association (the Bank). The Bank offers a variety of financial services to meet the banking and financial needs of the communities it serves. The Bank has 34 offices including 28 full-service branches located throughout Southern California. Its deposit products include noninterest-bearing deposits, interest-bearing demand deposits, savings accounts, money market deposit accounts, and certificates of deposit. The Bank offers loans, including commercial and industrial, commercial real estate, multifamily, small business administration (SBA), construction, single-family residential mortgage and other consumer loans. The Company provides customized banking and lending solutions to businesses, entrepreneurs and individuals throughout California, and full stack payment processing solutions through its subsidiary, Deepstack Technologies, LLC.

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.

Banc of California Inc has a Value Score of 92, which is considered to be undervalued.

When you look at Banc of California Inc’s price-to-sales ratio at 1.74 compared to the industry median at 2.09, this company has a lower price relative to revenue compared to its peers. This could make Banc of California Inc’s stock more attractive for value investors.

Banc of California Inc’s price-earnings ratio is 7.60 compared to the industry median at 7.75. This means it has a lower share price relative to earnings compared to its peers. This could make Banc of California Inc more attractive for value investors.

Now, let’s assess Banc of California Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 5.3, when compared to the industry median of 5.7, 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. Banc of California Inc’s shareholder yield is higher than its industry median ratio of 3.96%. 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. Banc of California Inc’s price-to-book ratio is lower than its industry median ratio of 0.88. This could make Banc of California Inc more attractive to investors looking for a new addition to their portfolio.

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

CB Financial Services Inc’s Value Grade

Value Grade:

CB Financial Services, Inc. is the bank holding company. The Company conducts its operations primarily through its wholly owned subsidiary, Community Bank (the Bank). The Bank offers a range of retail and commercial lending and deposit services and provides commercial and personal insurance brokerage services, through Exchange Underwriters, Inc., its wholly owned subsidiary. The Company?s principal lending activity has been the origination in its local market area of residential one- to four-family, commercial real estate, construction, commercial and industrial, and consumer loans. Its residential real estate loans are comprised of loans secured by one- to four-family residential properties. Its investment portfolio includes United States treasuries, United States government agency securities, mortgage-backed securities, investment grade corporate bonds, obligations of states and political subdivisions, short-term instruments, and other securities.

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.

CB Financial Services Inc has a Value Score of 84, which is considered to be undervalued.

CB Financial Services Inc’s price-earnings ratio is 8.4 compared to the industry median at 7.7. This means that it has a higher price relative to its earnings compared to its peers. This makes CB Financial Services Inc less attractive for value investors.

CB Financial Services Inc’s price-to-book ratio is lower than its peers. This could make CB Financial Services Inc fairly attractive for value investors when compared to the industry median at 0.88.

You can read more about CB 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.

Community West Bancshares’s Value Grade

Value Grade:

Community West Bancshares is a bank holding company. The Company provides full-service banking through its subsidiary, Community West Bank, N.A. (the Bank). The Bank is focused on relationship-based banking for small to medium-sized businesses and their owners, professional, high-net worth individuals, and non-profit organizations in the communities served by its branch offices. Through the bank, the Company provides a range of financial products and services to clients through seven full-service branch offices in the cities of Goleta, Oxnard, Paso Robles, San Luis Obispo, Santa Barbara, Santa Maria, and Ventura, California. The Company's products and services provided include deposit products, such as checking accounts, savings accounts, money market accounts and fixed-rate, fixed maturity certificates of deposits and cash management products. The Bank's lending products include commercial, commercial real estate, agricultural and consumer loans.

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.

Community West Bancshares has a Value Score of 76, which is considered to be undervalued.

Community West Bancshares’s price-earnings ratio is 9.2 compared to the industry median at 7.7. This means that it has a higher price relative to its earnings compared to its peers. This makes Community West Bancshares less attractive for value investors.

Community West Bancshares’s price-to-book ratio is lower than its peers. This could make Community West Bancshares more attractive for value investors when compared to the industry median at 0.88.

You can read more about Community West Bancshares’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 Keystone Corp’s Value Grade

Value Grade:

First Keystone Corporation is a bank holding company. The Company operates, through its subsidiary, First Keystone Community Bank (the Bank), which is engaged in the business of commercial banking operation and trust department. The Bank is a full-service commercial bank providing a range of services to individuals and small to medium-sized businesses in its North-eastern Pennsylvania market area. The Bank's commercial banking activities include accepting time, demand, and savings deposits and making secured and unsecured commercial, real estate, agricultural, and consumer loans. The Bank also provides personal and corporate trust and agency services to individuals, corporations, and others, including trust investment accounts, investment advisory services, mutual funds, estate planning, and management of pension and profit-sharing plans. The area served by the Bank includes a mix of rural communities, small to mid-sized towns, and cities.

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 Keystone Corp has a Value Score of 79, which is considered to be undervalued.

First Keystone Corp’s price-earnings ratio is 9.1 compared to the industry median at 7.7. This means that it has a higher price relative to its earnings compared to its peers. This makes First Keystone Corp less attractive for value investors.

First Keystone Corp’s price-to-book ratio is lower than its peers. This could make First Keystone Corp fairly attractive for value investors when compared to the industry median at 0.88.

You can read more about First Keystone 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.

New Peoples Bankshares Inc’s Value Grade

Value Grade:

New Peoples Bankshares, Inc. is a financial holding company. The Company?s business is conducted primarily through New Peoples Bank, Inc. (the Bank), a banking corporation. The Bank has a division doing business as New Peoples Financial Services, which offers investment services. The Bank offers a range of banking and related financial services focused primarily on serving individuals, small to medium size businesses and the professional community. It offers various banking services, including Commercial Loans, Residential Mortgage Loans, Construction Loans, Consumer Loans, Deposits, Investment Services and Other Bank Services. It offers a full range of short-medium- and longer-term commercial, 1-4 family residential mortgages and personal loans. Its commercial loans include both secured and unsecured loans for working capital, including inventory and receivables; business expansion, including acquisition of real estate and improvements; and purchase of equipment and machinery.

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.

New Peoples Bankshares Inc has a Value Score of 86, which is considered to be undervalued.

New Peoples Bankshares Inc’s price-earnings ratio is 6.7 compared to the industry median at 7.7. This means that it has a lower price relative to its earnings compared to its peers. This makes New Peoples Bankshares Inc more attractive for value investors.

New Peoples Bankshares Inc’s price-to-book ratio is lower than its peers. This could make New Peoples Bankshares Inc fairly attractive for value investors when compared to the industry median at 0.88.

You can read more about New Peoples 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.

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 69, which is considered to be undervalued.

PB Bankshares Inc’s price-earnings ratio is 13.5 compared to the industry median at 7.7. 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 0.88.

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.

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.

• Banc of California Inc stock has a Value Grade of A.
• CB Financial Services Inc stock has a Value Grade of A.
• Community West Bancshares stock has a Value Grade of B.
• First Keystone Corp stock has a Value Grade of B.
• New Peoples Bankshares Inc stock has a Value Grade of A.
• PB Bankshares 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 Monday, June 26
• 6 Undervalued Banks Stocks for Friday, June 23
• Which Is a Better Investment, Banco Itau Chile (ADR) or KeyCorp Stock?
• Which Is a Better Investment, Grupo Aval Acciones y Valores SA - ADR or Banco Itau Chile (ADR) Stock?

AAII Disclaimer

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