Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 7 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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7 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 7 undervalued stocks in the Banks industry for Monday, August 21, 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.

Business First Bancshares Inc’s Value Grade

Value Grade:

Business First Bancshares, Inc. is a financial holding company. The Company operates through its banking subsidiary, b1BANK (the Bank). The Bank is a Louisiana state banking association and community-based financial institution that offers a range of banking products and services. It operates throughout the state of Louisiana, in the Dallas/Fort Worth metroplex and Houston, from a network of banking centers and loan production offices. It offers checking, savings and money market accounts, certificates of deposit, commercial and consumer loans, mortgage loans, real estate loans, and other installment and term loans. In addition, it offers its customers wealth management products, drive-through banking facilities, ATMs, night depository, credit cards, debit cards, Internet banking, electronic funds transfers through ACH services, domestic and foreign wire transfers, traveler?s checks, cash management, vault services, loan and deposit sweep accounts, and lock box 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.

Business First Bancshares Inc has a Value Score of 70, which is considered to be undervalued.

When you look at Business First Bancshares Inc’s price-to-sales ratio at 1.65 compared to the industry median at 2.08, this company has a lower price relative to revenue compared to its peers. This could make Business First Bancshares Inc’s stock more attractive for value investors.

Business First Bancshares Inc’s price-earnings ratio is 7.81 compared to the industry median at 8.37. This means it has a lower share price relative to earnings compared to its peers. This could make Business First Bancshares Inc more attractive for value investors.

Now, let’s assess Business First Bancshares Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 5.7, when compared to the industry median of 5.1, 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. Business First Bancshares Inc’s shareholder yield is lower than its industry median ratio of 4.03%. 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. Business First Bancshares Inc’s price-to-book ratio is higher than its industry median ratio of 0.92. This could make Business First Bancshares Inc less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Business First Bancshares Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Business First Bancshares Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 9.14. This could make Business First Bancshares Inc more attractive because the lower P/FCF ratio indicates that Business First Bancshares Inc 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.

Bankwell Financial Group Inc’s Value Grade

Value Grade:

Bankwell Financial Group, Inc. is a bank holding company. The Company offers a range of financial services through its banking subsidiary, Bankwell Bank (the Bank). The Bank is a Connecticut state non-member bank. The Bank's commercial lending products include owner-occupied commercial real estate loans, commercial real estate investment loans, commercial loans (such as business term loans, equipment financing and lines of credit) to small and mid-sized businesses, and real estate construction and development loans. Its depository products include checking, savings, money market and certificates of deposit. The Bank operates branches in New Canaan, Stamford, Fairfield, Westport, Darien, Norwalk, and Hamden, Connecticut. The Bank provides a range of services to clients in its market, an area encompassing approximately a 100-mile radius around its branch network.

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.

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

Bankwell Financial Group Inc’s price-earnings ratio is 5.7 compared to the industry median at 8.4. This means that it has a lower price relative to its earnings compared to its peers. This makes Bankwell Financial Group Inc more attractive for value investors.

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

You can read more about Bankwell Financial Group 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.

CB Financial Services Inc’s Value Grade

Value Grade:

CB Financial Services, Inc. is the bank holding company. The Company conducts its operations primarily through its wholly owned subsidiary, Community Bank (the Bank). The Bank offers a range of retail and commercial lending and deposit services and provides commercial and personal insurance brokerage services, through Exchange Underwriters, Inc., its wholly owned subsidiary. The Company?s principal lending activity has been the origination in its local market area of residential one- to four-family, commercial real estate, construction, commercial and industrial, and consumer loans. Its residential real estate loans are comprised of loans secured by one- to four-family residential properties. Its investment portfolio includes United States treasuries, United States government agency securities, mortgage-backed securities, investment grade corporate bonds, obligations of states and political subdivisions, short-term instruments, and other securities.

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.

CB Financial Services Inc has a Value Score of 86, which is considered to be undervalued.

CB Financial Services Inc’s price-earnings ratio is 7.4 compared to the industry median at 8.4. This means that it has a lower price relative to its earnings compared to its peers. This makes CB Financial Services Inc more attractive for value investors.

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

You can read more about CB 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.

Consumers Bancorp, Inc.’s Value Grade

Value Grade:

Consumers Bancorp, Inc. is a bank holding company for Consumers National Bank (the Bank). The Company is engaged in the business of commercial and retail banking. The Bank’s business involves attracting deposits from businesses and individual customers and using such deposits to originate commercial, mortgage and consumer loans in its primary market area. The Bank also invests in securities consisting primarily of United States government-sponsored entities, municipal obligations, mortgage-backed and collateralized mortgage obligations issued by Fannie Mae, Freddie Mac and Ginnie Mae. Its deposit products include business and personal savings accounts, negotiable order of withdrawal accounts, time deposits and demand accounts, as well as certificates of deposit. The Bank’s primary market area includes Carroll, Columbiana, Jefferson, Mahoning, Stark, Summit, Wayne, and contiguous counties in Ohio, Pennsylvania, and West Virginia. The Bank operates online and 21 branch locations.

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.

Consumers Bancorp, Inc. has a Value Score of 93, which is considered to be undervalued.

Consumers Bancorp, Inc.’s price-earnings ratio is 5.0 compared to the industry median at 8.4. This means that it has a lower price relative to its earnings compared to its peers. This makes Consumers Bancorp, Inc. more attractive for value investors.

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

You can read more about Consumers 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 75, which is considered to be undervalued.

Kearny Financial Corp.’s price-earnings ratio is 12.7 compared to the industry median at 8.4. 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 0.92.

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.

Timberland Bancorp Inc’s Value Grade

Value Grade:

Timberland Bancorp, Inc. is the holding company for Timberland Bank (the Bank). The Bank is a community-oriented bank, which offers a variety of savings products to its retail customers while concentrating its lending activities on real estate mortgage loans. The Bank's principal lending activity consists of the origination of loans secured by real estate, including residential and commercial/multi-family construction loans, one-to four-family residential loans, multi-family loans, commercial real estate loans and land loans. It also offers adjustable-rate residential mortgage loans. The Bank also originates commercial business loans and other consumer loans. Its primary market area includes six sub-markets: Grays Harbor County; Thurston and Kitsap counties; Pierce and King counties, and Lewis County. The Bank operates approximately 23 branches located in Grays Harbor, Pierce, Thurston, Kitsap, King and Lewis counties in Washington State.

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.

Timberland Bancorp Inc has a Value Score of 76, which is considered to be undervalued.

Timberland Bancorp Inc’s price-earnings ratio is 8.8 compared to the industry median at 8.4. This means that it has a higher price relative to its earnings compared to its peers. This makes Timberland Bancorp Inc less attractive for value investors.

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

You can read more about Timberland 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.

Westbury Bancorp Inc’s Value Grade

Value Grade:

Westbury Bancorp, Inc. is the holding company for Westbury Bank (the Bank). The Bank is an independent community bank serving communities in Washington and Waukesha Counties through its eight banking offices providing deposit and loan services to individuals, professionals, and businesses throughout its markets. The Bank provides checking, savings, certificates of deposit, consumer loans, credit cards, individual retirement accounts, and others. The Bank’s services include online banking, mobile banking, bill pay, Pop Money, order checks, and e-statements, among others. The Bank’s business services include business checking and treasury management. The Bank’s commercial loans category includes commercial real estate, lines of credit, equipment, construction, working capital, acquisitions, letters of credit, and SBAs. The Bank offers an array of home loan options, including purchase, refinance, construction, Federal VA, WHEDA, and home equity loans and lines of credit.

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.

Westbury Bancorp Inc has a Value Score of 79, which is considered to be undervalued.

Westbury Bancorp Inc’s price-earnings ratio is 7.2 compared to the industry median at 8.4. This means that it has a lower price relative to its earnings compared to its peers. This makes Westbury Bancorp Inc more attractive for value investors.

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

You can read more about Westbury 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.

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 7 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.

• Business First Bancshares Inc stock has a Value Grade of B.
• Bankwell Financial Group Inc stock has a Value Grade of A.
• CB Financial Services Inc stock has a Value Grade of A.
• Consumers Bancorp, Inc. stock has a Value Grade of A.
• Kearny Financial Corp. stock has a Value Grade of B.
• Timberland Bancorp Inc stock has a Value Grade of B.
• Westbury Bancorp Inc stock has a Value Grade of B.

Now that you have a bit more background about each of the 7 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.

• 7 Undervalued Banks Stocks for Monday, August 21
• Which Is a Better Investment, ICICI Bank Ltd (ADR) or Banco Santander SA (ADR) Stock?
• Which Is a Better Investment, ICICI Bank Ltd (ADR) or Mizuho Financial Group Inc (ADR) Stock?
• 6 Undervalued Banks Stocks for Friday, August 18

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