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.

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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 Friday, July 28, 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.

Chino Commercial Bancorp (CA)’s Value Grade

Value Grade:

Chino Commercial Bancorp serves as the holding company for Chino Commercial Bank (The Bank), which is a nationally chartered bank. The Bank offers personal banking and business banking services. The Bank's personal banking services, such as personal checking and savings, individual retirement account, online banking, mobile banking, Cash on delivery, debit cards, direct deposit, e-statements, electronic tax payment services, night depository, notary services and savings bonds. Its business banking offers business checking and savings, business loans, online cash management, business mobile banking, remote deposit capture, merchant services and medical professionals. Its Commercial loan products include lines of credit, letters of credit, term loans and equipment loans, commercial real estate loans, accounts receivable financing, factoring, equipment leasing and other working capital financing. Its Financing products include home improvement lines of credit and MasterCard debit cards.

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.

Chino Commercial Bancorp (CA) has a Value Score of 73, which is considered to be undervalued.

When you look at Chino Commercial Bancorp (CA)’s price-to-sales ratio at 2.21 compared to the industry median at 2.23, this company has a lower price relative to revenue compared to its peers. This could make Chino Commercial Bancorp (CA)’s stock more attractive for value investors.

Chino Commercial Bancorp (CA)’s price-earnings ratio is 7.14 compared to the industry median at 8.60. This means it has a lower share price relative to earnings compared to its peers. This could make Chino Commercial Bancorp (CA) more attractive for value investors.

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. Chino Commercial Bancorp (CA)’s shareholder yield is lower than its industry median ratio of 3.80%. 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. Chino Commercial Bancorp (CA)’s price-to-book ratio is higher than its industry median ratio of 0.97. This could make Chino Commercial Bancorp (CA) less attractive to investors looking for a new addition to their portfolio.

Coastal Carolina Bancshares, Inc.’s Value Grade

Value Grade:

Coastal Carolina Bancshares, Inc. is the bank holding company of Coastal Carolina National Bank (the Bank). The Bank is a nationally chartered commercial bank. The Bank is a locally operated financial institution focused on providing personalized service. The principal business activity of the Bank is to provide banking services to domestic markets, principally in Horry, Georgetown, Aiken, Richland, Greenville, Spartanburg, and Brunswick (NC) counties. The Bank offers a range of banking services designed to meet the specific needs of individuals and small and medium-sized businesses. The Bank’s loan portfolio consists of loans to individuals and businesses for various personal and commercial purposes primarily in its respective markets. The Bank’s loan portfolio includes construction and land development, real estate-residential, real estate-non-residential, commercial and industrial, and consumer and other. The Bank also has branches in Garden City, North Myrtle Beach, 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.

Coastal Carolina Bancshares, Inc. has a Value Score of 73, which is considered to be undervalued.

Coastal Carolina Bancshares, Inc.’s price-earnings ratio is 7.0 compared to the industry median at 8.6. This means that it has a lower price relative to its earnings compared to its peers. This makes Coastal Carolina Bancshares, Inc. more attractive for value investors.

Coastal Carolina Bancshares, Inc.’s price-to-book ratio is lower than its peers. This could make Coastal Carolina Bancshares, Inc. fairly attractive for value investors when compared to the industry median at 0.97.

You can read more about Coastal Carolina 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.

Citizens Community Bancorp Inc.’s Value Grade

Value Grade:

Citizens Community Bancorp, Inc. is a bank holding company for Citizens Community Federal N.A. (the Bank). The Bank is a federally chartered National Bank serving customers in Wisconsin and Minnesota through about 23 full-service branch locations. The Bank offers traditional community banking services to businesses, agricultural operators and consumers, including one-to-four family residential mortgages. It offers a variety of loan products, including commercial real estate loans, commercial and industrial (C&I;) loans, agricultural real estate loans, agricultural operating loans, residential mortgages, home equity lines-of-credit and consumer loans. It maintains a portfolio of investments, consisting primarily of mortgage-backed securities, corporate asset-backed securities, United States Government sponsored agency securities, corporate debt securities and trust preferred securities. Its primary markets include the Chippewa Valley Region, Mankato and Twin Cities markets 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.

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

Citizens Community Bancorp Inc.’s price-earnings ratio is 7.0 compared to the industry median at 8.6. This means that it has a lower price relative to its earnings compared to its peers. This makes Citizens Community Bancorp Inc. more attractive for value investors.

Citizens Community Bancorp Inc.’s price-to-book ratio is higher than its peers. This could make Citizens Community Bancorp Inc. less attractive for value investors when compared to the industry median at 0.97.

You can read more about Citizens Community 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.

Kearny Financial Corp.’s Value Grade

Value Grade:

Kearny Financial Corp. is a holding company for Kearny Bank (the Bank), which is a New Jersey savings bank. The Bank is principally engaged in the business of attracting deposits from the public in New Jersey and New York and using these deposits, together with other funds, to originate or purchase loans for its portfolio and for sale into the secondary market. The Bank's loan portfolio is primarily consisting of multi-family loans, non-residential real estate loans, commercial business loans, construction loans, family residential mortgage loans, home equity loans and lines of credit and consumer loans. The Bank also maintains a portfolio of investment securities, primarily consisting of United States agency mortgage-backed securities, bank-qualified municipal obligations, corporate bonds, asset-backed securities, collateralized loan obligations, and subordinated debt. The Bank operates approximately 45 branch offices in New Jersey.

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.

Kearny Financial Corp. has a Value Score of 76, which is considered to be undervalued.

Kearny Financial Corp.’s price-earnings ratio is 14.1 compared to the industry median at 8.6. This means that it has a higher price relative to its earnings compared to its peers. This makes Kearny Financial Corp. less attractive for value investors.

Kearny Financial Corp.’s price-to-book ratio is higher than its peers. This could make Kearny Financial Corp. less attractive for value investors when compared to the industry median at 0.97.

You can read more about Kearny 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.

PennyMac Financial Services Inc’s Value Grade

Value Grade:

PennyMac Financial Services, Inc. is a specialty financial services company. The Company offers a comprehensive mortgage platform and integrated business primarily focused on the production and servicing of United States residential mortgage loans and the management of investments related to the United States mortgage market. The Company operates through three segments: production, servicing and investment management. The production segment performs loan origination, acquisition and sale activities for its account, as well as for PennyMac Mortgage Investment Trust (PMT). The servicing segment performs loan servicing for both newly originated loans it is holding for sale and loans it serves for others, including for PMT. The investment management segment performs investment management activities, which include the activities associated with investment asset acquisitions and dispositions, such as sourcing, due diligence, negotiation and settlement.

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.

PennyMac Financial Services Inc has a Value Score of 71, which is considered to be undervalued.

PennyMac Financial Services Inc’s price-earnings ratio is 13.3 compared to the industry median at 8.6. This means that it has a higher price relative to its earnings compared to its peers. This makes PennyMac Financial Services Inc less attractive for value investors.

PennyMac Financial Services Inc’s price-to-book ratio is lower than its peers. This could make PennyMac Financial Services Inc more attractive for value investors when compared to the industry median at 0.97.

You can read more about PennyMac 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.

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.

• Chino Commercial Bancorp (CA) stock has a Value Grade of B.
• Coastal Carolina Bancshares, Inc. stock has a Value Grade of B.
• Citizens Community Bancorp Inc. stock has a Value Grade of A.
• Kearny Financial Corp. stock has a Value Grade of B.
• PennyMac Financial Services Inc 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 Friday, July 28
• What You Need to Know About Alerus Financial Corp's Q2 Earnings
• What You Need to Know About Amalgamated Bank's Q2 Earnings
• What You Need to Know About Atlantic Union Bankshares Corp's Q2 Earnings

AAII Disclaimer

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