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 Tuesday, June 27, 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 69, which is considered to be undervalued.

When you look at Grupo Aval Acciones y Valores SA - ADR’s price-to-sales ratio at 0.51 compared to the industry median at 2.11, 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 5.98 compared to the industry median at 7.74. 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 9.8, 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 3.97%. 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 0.87. 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 7.43. 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 9.8 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 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 0.87.

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.

First Horizon Corp’s Value Grade

Value Grade:

First Horizon Corporation is a bank holding company, which provides diversified financial services primarily through its principal subsidiary, First Horizon Bank (the Bank). The Company's segments include Regional Banking, Specialty Banking and Corporate. The Regional Banking segment offers financial products and services, including traditional lending and deposit taking, to consumer and commercial clients primarily in the southern United States and other selected markets. This segment also provides investment, wealth management, financial planning, trust and asset management services for consumer clients. The Specialty Banking segment consists of specialty banking lines of business, which includes asset-based lending, mortgage warehouse lending, commercial real estate, franchise finance, correspondent banking, equipment finance, mortgage, and title insurance. This segment also delivers treasury management solutions, loan syndications, and international banking.

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 Horizon Corp has a Value Score of 87, which is considered to be undervalued.

First Horizon Corp’s price-earnings ratio is 6.9 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 First Horizon Corp more attractive for value investors.

First Horizon Corp’s price-to-book ratio is higher than its peers. This could make First Horizon Corp less attractive for value investors when compared to the industry median at 0.87.

You can read more about First Horizon 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.

First Resource Bank (Pennsylvania)’s Value Grade

Value Grade:

First Resource Bank (the Bank) is a locally owned and operated state-chartered bank. The Bank operates with three full-service branches, serving the banking needs of businesses, professionals and individuals in the Delaware Valley. It offers a full range of deposit and credit services with personalized service. The Bank is a full-service bank providing personal and business lending and deposit services. The Bank's business deposit products include Basic Business Checking, Non-Profit Checking, Business Money Market, Minute Escrow, IOLTA Checking, Public Funds Money Market, Certificate Deposit Account Registry Service (CDARS)/Insured Cash Sweep (ICS), and CD's. Its business lending products include Commercial Mortgage, Construction, Working Capital Credit Lines, Small Business Administration, Commercial Term Loans, and Credit Cards. Its personal deposit products include Checking, Checking with Interest, Diamond Club Checking, Personal Money Market, and Other Personal 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.

First Resource Bank (Pennsylvania) has a Value Score of 76, which is considered to be undervalued.

First Resource Bank (Pennsylvania)’s price-earnings ratio is 6.1 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 First Resource Bank (Pennsylvania) more attractive for value investors.

First Resource Bank (Pennsylvania)’s price-to-book ratio is higher than its peers. This could make First Resource Bank (Pennsylvania) less attractive for value investors when compared to the industry median at 0.87.

You can read more about First Resource Bank (Pennsylvania)’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 Reliance Bancshares Inc’s Value Grade

Value Grade:

First Reliance Bancshares, Inc. is a holding company for its subsidiary, First Reliance Bank (the Bank). The principal business activity of the Bank is to provide banking services to domestic markets throughout South Carolina and North Carolina. The Company’s personal products include checking, savings, credit cards, personal loans, mortgage and wealth strategies. Its services include online/mobile banking (Apple/Google/Samsung pay), personal loan payment, mortgage payment, convenient services (bounce protection), order checks and debit cards. The Bank’s business products include checking, savings, treasury services and wealth strategies. Its business borrowing includes business line of credit, installment loans, overdraft protection, commercial real estate, credit cards and business loan checklist.

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 Reliance Bancshares Inc has a Value Score of 79, which is considered to be undervalued.

First Reliance Bancshares Inc’s price-earnings ratio is 8.0 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 Reliance Bancshares Inc less attractive for value investors.

First Reliance Bancshares Inc’s price-to-book ratio is higher than its peers. This could make First Reliance Bancshares Inc less attractive for value investors when compared to the industry median at 0.87.

You can read more about First Reliance 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.

QCR Holdings, Inc.’s Value Grade

Value Grade:

QCR Holdings, Inc. is a multi-bank holding company. The Company serves the Quad Cities, Cedar Rapids, Waterloo/Cedar Falls, Des Moines/Ankeny and Springfield communities through four wholly owned banking subsidiaries (Banks), Quad City Bank & Trust (QCBT), Cedar Rapids Bank & Trust (CRBT), Community State Bank (CSB) and Guaranty Bank (GB), which provides full-service commercial and consumer banking and trust and asset management services. The Company's principal business consists of attracting deposits and investing those deposits in loans/leases and securities. The Company engages in direct financing lease contracts and equipment financing agreements through m2 Equipment Finance, LLC (m2), a wholly owned subsidiary of QCBT. The Company also engages in wealth management services through its banking subsidiaries. The Company provides a range of commercial and retail lending/leasing and investment services to corporations, partnerships, individuals, and government agencies.

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.

QCR Holdings, Inc. has a Value Score of 68, which is considered to be undervalued.

QCR Holdings, Inc.’s price-earnings ratio is 7.2 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 QCR Holdings, Inc. more attractive for value investors.

QCR Holdings, Inc.’s price-to-book ratio is lower than its peers. This could make QCR Holdings, Inc. fairly attractive for value investors when compared to the industry median at 0.87.

You can read more about QCR Holdings, 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.

Tri City Bankshares Corp’s Value Grade

Value Grade:

Tri City Bankshares Corporation is a bank holding company. The Company offers a range of financial products and services to external customers, including accepting deposits and originating residential, consumer and commercial loans. The Company operates through the community banking segment. Its wholly owned subsidiary is Tri City National Bank (the Bank). The Bank's personal banking services include checking accounts, savings and certificate of deposits, health savings accounts, individual retirement accounts, credit cards, and investments. The Bank's business banking services include business loans, business checking, business savings and certificate of deposits, health savings account (HSA) for employers, business credit cards, business services, business fraud prevention, and municipal banking. The Bank's mortgages and loans include mortgages, auto loans, personal loans, and business loans. The Bank's additional services include safe deposit boxes, gift cards, and others.

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.

Tri City Bankshares Corp has a Value Score of 85, which is considered to be undervalued.

Tri City Bankshares Corp’s price-earnings ratio is 6.8 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 Tri City Bankshares Corp more attractive for value investors.

Tri City Bankshares Corp’s price-to-book ratio is higher than its peers. This could make Tri City Bankshares Corp less attractive for value investors when compared to the industry median at 0.87.

You can read more about Tri City Bankshares 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.

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.

• 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.
• First Horizon Corp stock has a Value Grade of A.
• First Resource Bank (Pennsylvania) stock has a Value Grade of B.
• First Reliance Bancshares Inc stock has a Value Grade of B.
• QCR Holdings, Inc. stock has a Value Grade of B.
• Tri City Bankshares Corp 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 Tuesday, June 27
• 6 Undervalued Banks Stocks for Monday, June 26
• Why Banco Macro SA (ADR)’s (BMA) Stock Is Up 8.73%
• Why Grupo Financiero Galicia S.A. (ADR)’s (GGAL) Stock Is Up 4.71%

AAII Disclaimer

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