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, August 07, 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.

Akbank T.A.S. (ADR)’s Value Grade

Value Grade:

Akbank TAS is a Turkey-based commercial bank. It operates under the following segments: Consumer Banking; Commercial Banking, Small and Medium Enterprises (SME) Banking, Corporate-Investment and Private Banking, and Treasury. Consumer Banking offers retail services such as deposit accounts, consumer loans and asset management services, among others. Corporate Banking, Commercial Banking and SME Banking provide solutions and services to large, medium and small size corporate and commercial customers, such as Term Loan (TL) and foreign currency (FC) denominated working capital loans financing for investments, foreign trade financing and cash management services, among others. Project finance loans are provided within the context of Investment Banking activities. In the scope of Private Banking, the Bank serves the members of the high-income customers. The Treasury segment conducts TL and FC spot and forward transactions, treasury bonds and private sector bond transactions, among 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.

Akbank T.A.S. (ADR) has a Value Score of 89, which is considered to be undervalued.

When you look at Akbank T.A.S. (ADR)’s price-to-sales ratio at 1.40 compared to the industry median at 2.21, this company has a lower price relative to revenue compared to its peers. This could make Akbank T.A.S. (ADR)’s stock more attractive for value investors.

Akbank T.A.S. (ADR)’s price-earnings ratio is 10.18 compared to the industry median at 8.75. This means it has a higher share price relative to earnings compared to its peers. This could make Akbank T.A.S. (ADR) less 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. Akbank T.A.S. (ADR)’s shareholder yield is higher than its industry median ratio of 3.78%. 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. Akbank T.A.S. (ADR)’s price-to-book ratio is higher than its industry median ratio of 0.97. This could make Akbank T.A.S. (ADR) less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Akbank T.A.S. (ADR)’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Akbank T.A.S. (ADR)’s price-to-free-cash-flow ratio is lower than its industry median ratio of 8.51. This could make Akbank T.A.S. (ADR) more attractive because the lower P/FCF ratio indicates that Akbank T.A.S. (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.

Enterprise Financial Services Corp’s Value Grade

Value Grade:

Enterprise Financial Services Corp is a financial holding company for Enterprise Bank & Trust. Enterprise Bank & Trust is a full-service financial institution, which offers banking and wealth management services to individuals and corporate customers primarily located in Arizona, California, Kansas, Missouri, Nevada and New Mexico. The Company offers a range of business and personal banking services, including wealth management services provided through Enterprise Trust. Its lending services include commercial and industrial (C&I;), commercial real estate (CRE), real estate construction and development, residential real estate, small business administration (SBA), consumer and other loan products. The Company's lending services include a variety of deposit products, including property management and homeowners association along with a complete suite of treasury management and international trade services for operating businesses.

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.

Enterprise Financial Services Corp has a Value Score of 80, which is considered to be undervalued.

Enterprise Financial Services Corp’s price-earnings ratio is 7.3 compared to the industry median at 8.7. This means that it has a lower price relative to its earnings compared to its peers. This makes Enterprise Financial Services Corp more attractive for value investors.

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

You can read more about Enterprise Financial Services 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.

Fentura Financial Inc’s Value Grade

Value Grade:

Fentura Financial, Inc. is a financial services company. The Company operates through its subsidiary, the State Bank. The State Bank is a full-service community bank, which offers a range of banking services to individuals, small business and government entities. The State Bank’s commercial department provides a range of products including lines of credit, term loans, commercial mortgages, small business administration loans and a range of cash management products. The retail department offers personal checking, savings, time and individual retirement account (IRA) deposit accounts and an array of loan products including home equity, auto and personal loans. The residential loan department offers construction, purchase and refinance residential mortgage loans. The wealth management department offers a full-service suite of trust and portfolio management services. The Company operates approximately 19 service branches in Genesee, Livingston, Oakland, Saginaw and Shiawassee Counties.

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.

Fentura Financial Inc has a Value Score of 96, which is considered to be undervalued.

Fentura Financial Inc’s price-earnings ratio is 5.9 compared to the industry median at 8.7. This means that it has a lower price relative to its earnings compared to its peers. This makes Fentura Financial Inc more attractive for value investors.

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

You can read more about Fentura Financial 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 Northern Community Bancorp’s Value Grade

Value Grade:

First Northern Community Bancorp is a bank holding company. It specializes in relationship banking. The Bank is engaged in the commercial banking business and provides a range of products and services to small- and medium-sized businesses and individuals, including accepting demand, interest-bearing transactions, savings, and time deposits, and making commercial, consumer and real estate related loans. It also issues cashier checks, rents safe deposit boxes, and provides other customary banking services. It has approximately 14 branches, including Dixon, Davis, West Sacramento, Fairfield, Vacaville, Winters, Woodland, Sacramento, Roseville, Auburn, Rancho Cordova, Colusa, Willows, and Orland. It offers paycheck protection programs, commercial real estate loans, business term loans, business lines of credit, lighting loans, and small business loans (SBA). It also provides business online banking and bill pay, business mobile banking, remote deposit capture, and merchant 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 Northern Community Bancorp has a Value Score of 64, which is considered to be undervalued.

First Northern Community Bancorp’s price-earnings ratio is 7.7 compared to the industry median at 8.7. This means that it has a lower price relative to its earnings compared to its peers. This makes First Northern Community Bancorp more attractive for value investors.

First Northern Community Bancorp’s price-to-book ratio is lower than its peers. This could make First Northern Community Bancorp fairly attractive for value investors when compared to the industry median at 0.97.

You can read more about First Northern Community 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.

Security National Financial Corp’s Value Grade

Value Grade:

Security National Financial Corporation is a life insurance company that operates Life Insurance, Cemetery and Mortuary, and Mortgages segments. The Life Insurance segment is engaged in the business of selling and servicing selected lines of life insurance, annuity products, and accident and health insurance. The Cemetery and Mortuary segment consists of eight mortuaries and five cemeteries in the state of Utah, one cemetery in the state of California, and one cemetery and four mortuaries in the state of New Mexico. The Company is also engaged in pre-need selling of funeral, cemetery, mortuary, and cremation services through its Utah, California, and New Mexico operations. The Mortgage segment originates and underwrites or otherwise purchases residential and commercial loans for new construction, existing homes, and other real estate projects primarily in Florida, Nevada, Texas, and Utah. The Mortgage segment operates through approximately 118 retail offices in approximately 26 states.

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.

Security National Financial Corp has a Value Score of 97, which is considered to be undervalued.

Security National Financial Corp’s price-earnings ratio is 7.9 compared to the industry median at 8.7. This means that it has a lower price relative to its earnings compared to its peers. This makes Security National Financial Corp more attractive for value investors.

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

You can read more about Security National 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.

West Bancorporation Inc’s Value Grade

Value Grade:

West Bancorporation, Inc. is a financial holding company. The Company owns West Bank (the Bank), which is a business-focused community bank. The Bank provides full-service community banking and trust services to customers. The Bank offers a range of deposit services, including checking, savings and money market accounts and time certificates of deposit. The Company operates in the markets, including central Iowa, which is generally the greater Des Moines metropolitan area; eastern Iowa, which includes the area surrounding Iowa City and Coralville, and southern Minnesota, which includes the cities of Rochester, Owatonna, Mankato and St. Cloud. It also offers online banking, mobile banking and treasury management services, which help to meet the banking needs of its customers. It offers many types of credit to its customers, including commercial, real estate and consumer loans. It also offers trust services, including the administration of estates, conservatorships and agency 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.

West Bancorporation Inc has a Value Score of 70, which is considered to be undervalued.

West Bancorporation Inc’s price-earnings ratio is 9.5 compared to the industry median at 8.7. This means that it has a higher price relative to its earnings compared to its peers. This makes West Bancorporation Inc less attractive for value investors.

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

You can read more about West Bancorporation 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.

• Akbank T.A.S. (ADR) stock has a Value Grade of A.
• Enterprise Financial Services Corp stock has a Value Grade of B.
• Fentura Financial Inc stock has a Value Grade of A.
• First Northern Community Bancorp stock has a Value Grade of B.
• Security National Financial Corp stock has a Value Grade of A.
• West Bancorporation 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, August 07
• 7 Undervalued Banks Stocks for Friday, August 04
• What You Need to Know About First Citizens BancShares Inc (Delaware)'s Q2 Earnings
• What You Need to Know About Midwestone Financial Group Inc (IOWA)'s Q2 Earnings

AAII Disclaimer

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