Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 5 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.

Click the button below to learn more about A+ Investor and subscribe today.

5 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 5 undervalued stocks in the Banks industry for Thursday, June 29, 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.

First Farmers and Merchants Corp’s Value Grade

Value Grade:

First Farmers and Merchants Corporation is a bank holding company whose principal activity is the ownership and management of its wholly owned subsidiary, First Farmers & Merchants Bank (the Bank). The Bank is engaged in providing personal banking, business banking, wealth management and business treasury management. Its personal banking provides retire and invest, credit cards, personal lending and online and mobile banking. Its business banking provides business retire and invest, business treasury management, business loans, business credit cards and business online and mobile banking. The Bank’s wealth management provides trust services and investment services. The Bank is also providing a range of banking and financial services, including lending, investing of funds, obtaining deposits, trust and wealth management operations, and other financing activities to individual and corporate customers in the Middle Tennessee area.

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 Farmers and Merchants Corp has a Value Score of 85, which is considered to be undervalued.

When you look at First Farmers and Merchants Corp’s price-to-sales ratio at 2.14 compared to the industry median at 2.11, this company has a higher price relative to revenue compared to its peers. This could make First Farmers and Merchants Corp’s stock less attractive for value investors.

First Farmers and Merchants Corp’s price-earnings ratio is 6.31 compared to the industry median at 7.78. This means it has a lower share price relative to earnings compared to its peers. This could make First Farmers and Merchants Corp more attractive for value investors.

Now, let’s assess First Farmers and Merchants Corp’s EV/EBITDA ratio, also known as enterprise multiple. At 3.4, 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. First Farmers and Merchants Corp’s shareholder yield is higher than its industry median ratio of 3.95%. 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. First Farmers and Merchants Corp’s price-to-book ratio is higher than its industry median ratio of 0.87. This could make First Farmers and Merchants Corp less attractive to investors looking for a new addition to their portfolio.

Financial Institutions Inc’s Value Grade

Value Grade:

Financial Institutions, Inc. is a financial holding company. The Company provides a full range of banking and related financial services to consumer, commercial and municipal customers through its bank and nonbank subsidiaries. It offers a range of deposit, lending and other financial services to individuals, municipalities and businesses in Western and Central New York through its banking subsidiary, Five Star Bank. Its indirect lending network includes relationships with franchised automobile dealers in Western and Central New York, the Capital District of New York, and Northern and Central Pennsylvania. It offers insurance services through its subsidiary, SDN Insurance Agency, LLC. It offers customized investment advice, wealth management, investment consulting and retirement plan services through its subsidiaries Courier Capital, LLC and HNP Capital, LLC. It also offers banking as a service and financial technology solutions through its subsidiary Corn Hill Innovation Labs, 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.

Financial Institutions Inc has a Value Score of 98, which is considered to be undervalued.

Financial Institutions Inc’s price-earnings ratio is 4.8 compared to the industry median at 7.8. This means that it has a lower price relative to its earnings compared to its peers. This makes Financial Institutions Inc more attractive for value investors.

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

You can read more about Financial Institutions 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.

FVCBankcorp Inc’s Value Grade

Value Grade:

FVCBankcorp, Inc. is a bank holding company. The Company operates primarily through its subsidiary, FVCbank, (the Bank). The Bank is a community bank serving the banking needs of commercial businesses, nonprofit organizations, professional service entities, and their owners and employees located in the greater Baltimore and Washington D.C., metropolitan areas. It has nine full-service offices in Arlington, Fairfax, Manassas, Reston, and Springfield, Virginia, Washington D.C., and Baltimore, Bethesda, and Rockville, Maryland. It offers retail banking services to accommodate the individual needs of both corporate customers as well as the communities. It also offers online banking, mobile banking, and a remote deposit service, which allows clients to facilitate and expedite deposit transactions through electronic devices. It also offers Lending Products, such as commercial real estate loans, commercial construction loans, and commercial loans for a variety of business purposes.

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.

FVCBankcorp Inc has a Value Score of 65, which is considered to be undervalued.

FVCBankcorp Inc’s price-earnings ratio is 10.3 compared to the industry median at 7.8. This means that it has a higher price relative to its earnings compared to its peers. This makes FVCBankcorp Inc less attractive for value investors.

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

You can read more about FVCBankcorp 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.

Katahdin Bankshares Corp’s Value Grade

Value Grade:

Katahdin Bankshares Corp. is a bank holding company. The Company operates through its subsidiary, Katahdin Trust Company (the Bank), which is a commercial bank. The Bank conducts commercial and retail banking business that includes accepting deposits from the public and utilizing those funds to originate commercial loans, commercial and residential real estate loans, and consumer loans. Securities and insurance products are made available to the Bank's customers through Katahdin Financial Services, a service of Cetera Investment Service LLC, a registered broker-dealer and unaffiliated with the Bank. Maine Financial Group (MFG), an affiliate of the Bank, provides heavy equipment financing in the trucking, construction, forest products, and marine industries located around northern New England. It serves individuals and businesses throughout Maine and online at KatahdinTrust.com. The Bank operates various branches throughout northern Maine and the greater Bangor and Portland regions.

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.

Katahdin Bankshares Corp has a Value Score of 88, which is considered to be undervalued.

Katahdin Bankshares Corp’s price-earnings ratio is 6.4 compared to the industry median at 7.8. This means that it has a lower price relative to its earnings compared to its peers. This makes Katahdin Bankshares Corp more attractive for value investors.

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

You can read more about Katahdin 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.

Oak Valley Bancorp’s Value Grade

Value Grade:

Oak Valley Bancorp is a bank holding company of Oak Valley Community Bank (the Bank). The Bank offers a range of commercial banking services designed for both individuals and small to medium-sized businesses in the two areas, such as the Central Valley and the Eastern Sierras. The Bank offers a complement of business checking and savings accounts for its business customers. The Bank also offers commercial and real estate loans, as well as lines of credit. The Bank offers other services for both individuals and businesses, including online banking, remote deposit capture, mobile banking, merchant services, night depository, extended hours, wire transfer of funds, note collection, and automated teller machines (ATMs) in a national network. The Company operates branches in Oakdale, Sonora, Bridgeport, Bishop, Mammoth Lakes, Modesto, Manteca, Patterson, Turlock, Ripon, Stockton, Escalon, Sacramento, and Roseville, California.

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.

Oak Valley Bancorp has a Value Score of 68, which is considered to be undervalued.

Oak Valley Bancorp’s price-earnings ratio is 7.0 compared to the industry median at 7.8. This means that it has a lower price relative to its earnings compared to its peers. This makes Oak Valley Bancorp more attractive for value investors.

Oak Valley Bancorp’s price-to-book ratio is lower than its peers. This could make Oak Valley Bancorp more attractive for value investors when compared to the industry median at 0.87.

You can read more about Oak Valley 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 5 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.

• First Farmers and Merchants Corp stock has a Value Grade of A.
• Financial Institutions Inc stock has a Value Grade of A.
• FVCBankcorp Inc stock has a Value Grade of B.
• Katahdin Bankshares Corp stock has a Value Grade of A.
• Oak Valley Bancorp stock has a Value Grade of B.

Now that you have a bit more background about each of the 5 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.

• 5 Undervalued Banks Stocks for Thursday, June 29
• 4 Undervalued Banks Stocks for Wednesday, June 28
• Why Customers Bancorp Inc’s (CUBI) Stock Is Up 5.86%
• Why ServisFirst Bancshares Inc’s (SFBS) Stock Is Down 4.25%

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.