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.

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

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 Wednesday, July 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.

Sierra Bancorp’s Value Grade

Value Grade:

Sierra Bancorp is a bank holding company for Bank of the Sierra (the Bank). The Bank is a California state-chartered bank, which offers a range of retail and commercial banking services via branch offices located throughout California?s South San Joaquin Valley, the Central Coast, Ventura County, and neighboring communities. It provides an Internet branch which provides the ability to open deposit accounts online; an online banking option with bill-pay and mobile banking capabilities; online lending solutions for consumers and small businesses; a customer service center, and an automated telephone banking system. Its lending activities cover real estate, commercial (including small businesses), mortgage warehouse, agricultural, and consumer loans. In addition to loans, it offers a range of deposit products and services for individuals and businesses, including checking accounts, savings accounts, money market demand accounts, time deposits, retirement accounts, and sweep accounts.

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.

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

When you look at Sierra Bancorp’s price-to-sales ratio at 2.04 compared to the industry median at 2.23, this company has a lower price relative to revenue compared to its peers. This could make Sierra Bancorp’s stock more attractive for value investors.

Sierra Bancorp’s price-earnings ratio is 7.80 compared to the industry median at 8.29. This means it has a lower share price relative to earnings compared to its peers. This could make Sierra Bancorp more attractive for value investors.

Now, let’s assess Sierra Bancorp’s EV/EBITDA ratio, also known as enterprise multiple. At 4.5, 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. Sierra Bancorp’s shareholder yield is higher than its industry median ratio of 3.83%. 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. Sierra Bancorp’s price-to-book ratio is lower than its industry median ratio of 0.93. This could make Sierra Bancorp more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Sierra Bancorp’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Sierra Bancorp’s price-to-free-cash-flow ratio is higher than its industry median ratio of 7.92. This could make Sierra Bancorp less attractive because the higher P/FCF ratio indicates that Sierra Bancorp 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.

Citizens Holding Company’s Value Grade

Value Grade:

Citizens Holding Company is a one-bank holding company of The Citizens Bank of Philadelphia (the Bank). It engages in commercial and personal banking activities, including accepting demand deposits, savings and time deposit accounts, making secured and unsecured loans, issuing letters of credit, originating mortgage loans, and providing personal and corporate trust services. The Bank has over 24 banking locations in 14 counties throughout the state of Mississippi. In addition to full service commercial banking, it offers mortgage loans, title insurance services through third party partnerships and a range of Internet banking services, including online banking, bill pay and cash management services for businesses. It also provides certain services that are closely related to commercial banking, such as credit life insurance and title insurance for its loan customers through third-party relationships. Internet services are available at the Bank website, www.thecitizensbankphila.com.

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.

Citizens Holding Company has a Value Score of 71, which is considered to be undervalued.

Citizens Holding Company’s price-earnings ratio is 7.7 compared to the industry median at 8.3. This means that it has a lower price relative to its earnings compared to its peers. This makes Citizens Holding Company more attractive for value investors.

Citizens Holding Company’s price-to-book ratio is lower than its peers. This could make Citizens Holding Company more attractive for value investors when compared to the industry median at 0.93.

You can read more about Citizens Holding Company’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.

Eagle Bancorp Inc’s Value Grade

Value Grade:

Eagle Bancorp, Inc. is a bank holding company for EagleBank (the Bank). The Bank is a chartered commercial bank, which conducts a full-service community banking business, primarily in Northern Virginia, Cyland, and Washington, D.C. The primary financial services offered by the Bank include real estate, commercial and consumer lending, as well as traditional deposit and repurchase agreement products. The Bank is also active in the origination and sale of residential mortgage loans, the origination of small business loans, and the origination, securitization and sale of multifamily Federal Housing Administration (FHA) loans. The Bank offers its products and services through approximately 16 banking offices, five lending centers and various electronic capabilities, including remote deposit services and mobile banking services. The Bank has three active direct subsidiaries: Bethesda Leasing, LLC, Eagle Insurance Services, LLC, and Landroval Municipal Finance, Inc.

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.

Eagle Bancorp Inc has a Value Score of 94, which is considered to be undervalued.

Eagle Bancorp Inc’s price-earnings ratio is 6.7 compared to the industry median at 8.3. This means that it has a lower price relative to its earnings compared to its peers. This makes Eagle Bancorp Inc more attractive for value investors.

Eagle Bancorp Inc’s price-to-book ratio is higher than its peers. This could make Eagle Bancorp Inc less attractive for value investors when compared to the industry median at 0.93.

You can read more about Eagle 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.

Glen Burnie Bancorp’s Value Grade

Value Grade:

Glen Burnie Bancorp is a bank holding company of The Bank of Glen Burnie (the Bank). The Bank is engaged in the commercial and retail banking business, including the acceptance of demand and time deposits, and the origination of loans to individuals, associations, partnerships, and corporations. The Bank's real estate financing consists of residential first and second mortgage loans, home equity lines of credit and commercial mortgage loans. The Bank's commercial lending consists of both secured and unsecured loans. The Bank originates automobile loans through arrangements with local automobile dealers. The Bank also maintains a remote automated teller machine (ATM) located in Pasadena, Maryland. The Bank serves the northern Anne Arundel County and surrounding areas from its main office and branch in Glen Burnie, Maryland, and branch offices in Odenton, Riviera Beach, Crownsville, Severn (two locations), Linthicum and Severna Park, Maryland.

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.

Glen Burnie Bancorp has a Value Score of 74, which is considered to be undervalued.

Glen Burnie Bancorp’s price-earnings ratio is 11.1 compared to the industry median at 8.3. This means that it has a higher price relative to its earnings compared to its peers. This makes Glen Burnie Bancorp less attractive for value investors.

Glen Burnie Bancorp’s price-to-book ratio is lower than its peers. This could make Glen Burnie Bancorp more attractive for value investors when compared to the industry median at 0.93.

You can read more about Glen Burnie 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.

• Sierra Bancorp stock has a Value Grade of A.
• Citizens Holding Company stock has a Value Grade of B.
• Eagle Bancorp Inc stock has a Value Grade of A.
• Glen Burnie Bancorp stock has a Value Grade of B.

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 Wednesday, July 19
• What You Need to Know About Bank of America Corp's Q2 Earnings
• What You Need to Know About Equity BancShares Inc's Q2 Earnings
• What You Need to Know About Fulton Financial Corp's Q2 Earnings

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.