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 Friday, August 18, 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.

Community Bancorp’s Value Grade

Value Grade:

Community Bancorp. is a bank holding company for Community National Bank (the Bank). The Bank provides a range of loan and deposit services to the individuals, businesses, nonprofit organizations, and municipalities in its northern and central Vermont markets. Its services include business banking, commercial real estate lending, residential real estate lending, retail credit, municipal and institutional banking, and retail banking. It offers credit products for a variety of general business purposes, including financing for commercial business properties, equipment, inventories, and accounts receivable, as well as letters of credit. It offers business checking and other deposit accounts, cash management services, repurchase agreements, card processing, and remote deposit capture. It provides loan products, including personal loans, automobile loans and boat/recreational vehicle loans. It provides consumer banking services, including checking accounts, and mobile and telephone banking.

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.

Community Bancorp has a Value Score of 82, which is considered to be undervalued.

When you look at Community Bancorp’s price-to-sales ratio at 2.35 compared to the industry median at 2.09, this company has a higher price relative to revenue compared to its peers. This could make Community Bancorp’s stock less attractive for value investors.

Community Bancorp’s price-earnings ratio is 6.33 compared to the industry median at 8.34. This means it has a lower share price relative to earnings compared to its peers. This could make Community Bancorp more attractive for value investors.

Now, let’s assess Community Bancorp’s EV/EBITDA ratio, also known as enterprise multiple. At 5.1, when compared to the industry median of 5.1, the company may be considered fairly valued 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. Community Bancorp’s shareholder yield is higher than its industry median ratio of 4.06%. 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. Community Bancorp’s price-to-book ratio is higher than its industry median ratio of 0.92. This could make Community Bancorp less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Community Bancorp’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Community Bancorp’s price-to-free-cash-flow ratio is lower than its industry median ratio of 9.12. This could make Community Bancorp more attractive because the lower P/FCF ratio indicates that Community 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.

Central Valley Community Bancorp’s Value Grade

Value Grade:

Central Valley Community Bancorp is a bank holding company for Central Valley Community Bank (the Bank). The Bank conducts a commercial banking business, which includes accepting demand, savings and time deposits and making commercial, real estate and consumer loans. It also provides domestic and international wire transfer services and provides safe deposit boxes and other customary banking services. The Bank also offers Internet banking that consists of inquiry, account status, bill paying, account transfers, and cash management. The Bank has a Real Estate Division, an Agribusiness Center, and an SBA Lending Division. The Bank?s Real Estate Division processes or assists in processing the majority of the Bank's real estate-related transactions, including interim construction loans for single family residences and commercial buildings. The Bank offers permanent single family residential loans through its mortgage broker services. The Bank operates over 19 full-service banking offices.

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.

Central Valley Community Bancorp has a Value Score of 89, which is considered to be undervalued.

Central Valley Community Bancorp’s price-earnings ratio is 6.2 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 Central Valley Community Bancorp more attractive for value investors.

Central Valley Community Bancorp’s price-to-book ratio is lower than its peers. This could make Central Valley Community Bancorp fairly attractive for value investors when compared to the industry median at 0.92.

You can read more about Central Valley 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.

New York Community Bancorp, Inc.’s Value Grade

Value Grade:

New York Community Bancorp, Inc. is the bank holding company for Flagstar Bank, N.A. (the Bank). The Bank is engaged in several national businesses, including multi-family lending, mortgage originations and servicing, and warehouse lending. The Bank is a multi-family portfolio lender in the New York City market area, where it specializes in rent-regulated, non-luxury apartment buildings. Its specialty finance loans and leases are generally made to large corporate obligors that participate in stable industries nationwide, and its warehouse loans are made to mortgage lenders across the country. The Bank offers a suite of cash management products to address the needs of small and mid-size businesses and professional associations. The Bank operates about 395 branches across nine states. The Bank also operates through eight local divisions, such as Queens County Savings Bank, Roslyn Savings Bank, Richmond County Savings Bank, Roosevelt Savings Bank, Ohio Savings Bank, 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.

New York Community Bancorp, Inc. has a Value Score of 70, which is considered to be undervalued.

New York Community Bancorp, Inc.’s price-earnings ratio is 2.9 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 New York Community Bancorp, Inc. more attractive for value investors.

New York Community Bancorp, Inc.’s price-to-book ratio is higher than its peers. This could make New York Community Bancorp, Inc. less attractive for value investors when compared to the industry median at 0.92.

You can read more about New York 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.

Southern First Bancshares Inc’s Value Grade

Value Grade:

Southern First Bancshares, Inc. is a bank holding company. The Company?s primary business is to serve as the holding company for Southern First Bank (the Bank), a South Carolina state bank. The Bank is primarily engaged in the business of accepting demand deposits and savings deposits insured by the Federal Deposit Insurance Corporation (the FDIC) and providing commercial, consumer and mortgage loans to the general public. The Bank offers a range of lending services, including real estate, commercial, and equity-line consumer loans to individuals and small- to medium-sized businesses and professional firms. The Bank provides a range of financial services to individuals and companies in South Carolina, North Carolina, and Georgia. The Bank operates over eight retail offices located in the Greenville, Columbia, and Charleston markets of South Carolina, three retail offices in the Raleigh, Greensboro, and Charlotte markets of North Carolina and one retail office in Atlanta, Georgia.

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.

Southern First Bancshares Inc has a Value Score of 72, which is considered to be undervalued.

Southern First Bancshares Inc’s price-earnings ratio is 11.9 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 Southern First Bancshares Inc less attractive for value investors.

Southern First Bancshares Inc’s price-to-book ratio is higher than its peers. This could make Southern First Bancshares Inc less attractive for value investors when compared to the industry median at 0.92.

You can read more about Southern First 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.

S&T; Bancorp Inc’s Value Grade

Value Grade:

S&T; Bancorp, Inc. is a bank holding company. The Company?s portfolio segments include Commercial Real Estate (CRE), Commercial and Industrial (C&I;), Commercial Construction and Business Banking. The CRE segment includes loans secured by commercial purpose real estate, including both owner-occupied properties and investment properties for various purposes such as hotels, retail, multifamily and healthcare. The C&I; segment includes loans made to operating companies or manufacturers for the purpose of production, operating capacity, accounts receivable, inventory, or equipment financing. The Commercial Construction segment includes loans made to finance the construction of buildings or other structures, as well as to finance the acquisition and development of raw land for various purposes. The Business Banking segment includes commercial loans made to small businesses. The Company?s portfolio segments also include Consumer Real Estate and Other Consumers.

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.

S&T; Bancorp Inc has a Value Score of 79, which is considered to be undervalued.

S&T; Bancorp Inc’s price-earnings ratio is 7.5 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 S&T; Bancorp Inc more attractive for value investors.

S&T; Bancorp Inc’s price-to-book ratio is lower than its peers. This could make S&T; Bancorp Inc fairly attractive for value investors when compared to the industry median at 0.92.

You can read more about S&T; 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.

Zions Bancorporation NA’s Value Grade

Value Grade:

Zions Bancorporation, National Association provides a range of banking products and related services, primarily in the states of Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Texas, Utah, Washington, and Wyoming. The Company conducts its operations primarily through seven separately managed bank divisions, each with its own local branding and management. Its products and services include commercial and small business banking, commercial real estate lending, retail banking, and wealth management. Its commercial business banking products and services include commercial and industrial lending and leasing, municipal and public finance services, cash management services, commercial card and merchant processing services, and capital markets, syndication, and foreign exchange services. Its retail banking products and services include residential mortgages, home equity lines of credit, personal lines of credit and installment consumer loans, and personal trust 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.

Zions Bancorporation NA has a Value Score of 95, which is considered to be undervalued.

Zions Bancorporation NA’s price-earnings ratio is 6.1 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 Zions Bancorporation NA more attractive for value investors.

Zions Bancorporation NA’s price-to-book ratio is lower than its peers. This could make Zions Bancorporation NA more attractive for value investors when compared to the industry median at 0.92.

You can read more about Zions Bancorporation NA’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.

• Community Bancorp stock has a Value Grade of A.
• Central Valley Community Bancorp stock has a Value Grade of A.
• New York Community Bancorp, Inc. stock has a Value Grade of B.
• Southern First Bancshares Inc stock has a Value Grade of B.
• S&T; Bancorp Inc stock has a Value Grade of B.
• Zions Bancorporation NA stock has a Value Grade of A.

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 Friday, August 18
• What You Need to Know About Nu Holdings Ltd's Q2 Earnings
• 4 Undervalued Banks Stocks for Thursday, August 17
• Why Banco Bbva Argentina SA (ADR)’s (BBAR) Stock Is Down 5.01%

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.