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.

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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 Tuesday, August 08, 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.

Berkshire Hills Bancorp Inc’s Value Grade

Value Grade:

Berkshire Hills Bancorp, Inc. is a holding company for Berkshire Bank (the Bank). The Bank is engaged in providing business and consumer banking, mortgage, wealth management, and investment services. The Bank's loan portfolio consists of commercial real estate loan, commercial and industrial loans (C&I;), residential mortgages loan, and consumer loans. The Bank offers a variety of deposit accounts with a range of interest rates and terms. The Bank?s deposit accounts consist of demand deposits (non-interest-bearing checking), NOW (interest-bearing checking), regular savings, money market savings, and time certificates of deposit. Its Wealth Management Group provides consultative investment management, trust administration, and financial planning to individuals, businesses, and institutions. It also offers interest rate swaps to commercial loan customers and backs these swaps with offsetting swaps. It serves approximately 100 full-service financial centers its New England and New York.

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.

Berkshire Hills Bancorp Inc has a Value Score of 82, which is considered to be undervalued.

When you look at Berkshire Hills Bancorp Inc’s price-to-sales ratio at 2.02 compared to the industry median at 2.22, this company has a lower price relative to revenue compared to its peers. This could make Berkshire Hills Bancorp Inc’s stock more attractive for value investors.

Berkshire Hills Bancorp Inc’s price-earnings ratio is 10.17 compared to the industry median at 8.77. This means it has a higher share price relative to earnings compared to its peers. This could make Berkshire Hills Bancorp Inc less attractive for value investors.

Now, let’s assess Berkshire Hills Bancorp Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 7.1, when compared to the industry median of 6.0, 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. Berkshire Hills Bancorp Inc’s shareholder yield is higher than its industry median ratio of 3.69%. 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. Berkshire Hills Bancorp Inc’s price-to-book ratio is higher than its industry median ratio of 0.97. This could make Berkshire Hills Bancorp Inc less attractive to investors looking for a new addition to their portfolio.

Bank of East Asia Ltd (ADR)’s Value Grade

Value Grade:

Bank of East Asia Ltd is a company mainly engaged in the banking business. The Company operates its business through nine segments. The Mainland China Operations segment mainly include the back office unit for Mainland China operations in Hong Kong, all subsidiaries and associates operating in Mainland China, except those subsidiaries carrying out data processing and other back office operations for Hong Kong operations in Mainland China. The Corporate Banking segment provides corporate lending and loan syndication, asset-based lending, commercial lending, securities lending and trade financing activities with correspondent banks and corporates. The Personal Banking segment is engaged in the branch operations, personal internet banking, consumer finance, property loans and credit card business to individual customers. The Overseas Operations segment provides back office unit for overseas banking operations in Hong Kong, Macau Branch, Taiwan Branch and all branches, subsidiaries and ass

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.

Bank of East Asia Ltd (ADR) has a Value Score of 97, which is considered to be undervalued.

Bank of East Asia Ltd (ADR)’s price-earnings ratio is 8.6 compared to the industry median at 8.8. This means that it has a lower price relative to its earnings compared to its peers. This makes Bank of East Asia Ltd (ADR) more attractive for value investors.

Bank of East Asia Ltd (ADR)’s price-to-book ratio is higher than its peers. This could make Bank of East Asia Ltd (ADR) less attractive for value investors when compared to the industry median at 0.97.

You can read more about Bank of East Asia Ltd (ADR)’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.

Byline Bancorp Inc’s Value Grade

Value Grade:

Byline Bancorp, Inc. is a bank holding company. The Company conducts all its business activities through its subsidiary, Byline Bank (the Bank), a full-service commercial bank, and Byline Bank?s subsidiaries. The Bank offers a range of banking products and services to small and medium-sized businesses, commercial real estate and financial sponsors and to consumers who generally live or work near its branches. It offers online account opening to consumer and business customers through its Website. It also provides trust and wealth management services to its customers. In addition to its traditional commercial banking business, the Bank provides small ticket equipment leasing solutions through Byline Financial Group (BFG), a wholly owned subsidiary of the Bank. It also supports its business customers with a range of deposit and treasury management products, along with business transaction accounts. It provides financing solutions for equipment vendors and their end users through BFG.

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.

Byline Bancorp Inc has a Value Score of 83, which is considered to be undervalued.

Byline Bancorp Inc’s price-earnings ratio is 8.8 compared to the industry median at 8.8. This means that it has a higher price relative to its earnings compared to its peers. This makes Byline Bancorp Inc fairly attractive for value investors.

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

You can read more about Byline 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.

Finward Bancorp’s Value Grade

Value Grade:

Finward Bancorp (Bancorp) is the holding company for Peoples Bank (the Bank), which is an Indiana-chartered commercial bank. The Bancorp?s lending activities include residential mortgage loans, construction loans, commercial real estate loans, consumer loans, commercial business loans and loans to municipalities. The Bank also offers a range of deposit instruments, including non-interest-bearing demand accounts, interest bearing demand accounts, savings accounts, money market deposit accounts, certificate accounts and retirement savings plans. Its wealth management group provides estate and retirement planning, guardianships, land trusts, profit sharing and 401(k) retirement plans, individual retirement accounts (IRAs) and Keogh accounts, investment agency accounts, and serves as the personal representative of estates, and acts as trustee for revocable and irrevocable trusts. Its primary market areas include Lake and Porter Counties, in Northwest Indiana, and Cook County, Illinois.

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.

Finward Bancorp has a Value Score of 78, which is considered to be undervalued.

Finward Bancorp’s price-earnings ratio is 7.7 compared to the industry median at 8.8. This means that it has a lower price relative to its earnings compared to its peers. This makes Finward Bancorp more attractive for value investors.

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

You can read more about Finward 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.

• Berkshire Hills Bancorp Inc stock has a Value Grade of A.
• Bank of East Asia Ltd (ADR) stock has a Value Grade of A.
• Byline Bancorp Inc stock has a Value Grade of A.
• Finward 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 Tuesday, August 08
• What You Need to Know About First Citizens BancShares Inc (Delaware)'s Q2 Earnings
• What You Need to Know About Itau Unibanco Holding SA (ADR)'s Q1 Earnings
• What You Need to Know About Walker & Dunlop, Inc.'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.