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 Thursday, August 24, 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.

Colony Bankcorp Inc’s Value Grade

Value Grade:

Colony Bankcorp, Inc. is a bank holding company that operates through its subsidiary, Colony Bank (the Bank). The Bank's product line includes loans to small and medium-sized businesses, residential and commercial construction and land development loans, commercial real estate loans, commercial loans, agri-business and production loans, residential mortgage loans, home equity loans, consumer loans and a variety of demand, savings and time deposit products. The Company operates through three segments: the Banking Division, the Retail Mortgage Division and the Small Business Specialty Lending Division. The Banking Division derives full-service financial services, including commercial loans, consumer loans and deposit accounts. The Retail Mortgage offers services for one-to-four family residential mortgage loans. The Small Business Specialty Lending Division offers small business administration (SBA) and United States Department of Agriculture (USDA) government guaranteed loans.

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.

Colony Bankcorp Inc has a Value Score of 90, which is considered to be undervalued.

When you look at Colony Bankcorp Inc’s price-to-sales ratio at 1.70 compared to the industry median at 2.04, this company has a lower price relative to revenue compared to its peers. This could make Colony Bankcorp Inc’s stock more attractive for value investors.

Colony Bankcorp Inc’s price-earnings ratio is 8.80 compared to the industry median at 8.15. This means it has a higher share price relative to earnings compared to its peers. This could make Colony Bankcorp Inc less attractive for value investors.

Now, let’s assess Colony Bankcorp Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 4.8, when compared to the industry median of 5.1, the company may be considered undervalued 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. Colony Bankcorp Inc’s shareholder yield is higher than its industry median ratio of 4.04%. 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. Colony Bankcorp Inc’s price-to-book ratio is lower than its industry median ratio of 0.91. This could make Colony Bankcorp Inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Colony Bankcorp Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Colony Bankcorp Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 8.91. This could make Colony Bankcorp Inc more attractive because the lower P/FCF ratio indicates that Colony Bankcorp 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.

Cashmere Valley Bank’s Value Grade

Value Grade:

Cashmere Valley Bank is a state-chartered bank (the Bank). The Bank provides loan and deposit services to small and middle-market business and retail customers. The Bank offers a variety of deposit products to its consumer and commercial clients. Its Lending activities include the origination of real estate, commercial and agricultural business, dealer financing, leasing, and consumer loans. The Bank is also an active participant in the secondary market, originating residential loans for sale with servicing retained. The Bank is also an active participant in the secondary market, originating residential loans for sale with servicing retained. It operates over 11 branches in North Central Washington. The Bank's subsidiary, Mitchell, Reed and Schmitten Insurance, Inc. (MRS) is an insurance agency and brokers that offers personal and commercial lines of insurance, including property, casualty, life, and health insurance. MRS is located in Chelan, Kittitas, Yakima and King 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.

Cashmere Valley Bank has a Value Score of 79, which is considered to be undervalued.

Cashmere Valley Bank’s price-earnings ratio is 5.4 compared to the industry median at 8.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Cashmere Valley Bank more attractive for value investors.

Cashmere Valley Bank’s price-to-book ratio is lower than its peers. This could make Cashmere Valley Bank fairly attractive for value investors when compared to the industry median at 0.91.

You can read more about Cashmere Valley Bank’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.

Eagle Bancorp Inc’s Value Grade

Value Grade:

Eagle Bancorp, Inc. is a bank holding company for EagleBank (the Bank). The Bank is a chartered commercial bank, which conducts a full-service community banking business, primarily in Northern Virginia, Cyland, and Washington, D.C. The primary financial services offered by the Bank include real estate, commercial and consumer lending, as well as traditional deposit and repurchase agreement products. The Bank is also active in the origination and sale of residential mortgage loans, the origination of small business loans, and the origination, securitization and sale of multifamily Federal Housing Administration (FHA) loans. The Bank offers its products and services through approximately 16 banking offices, five lending centers and various electronic capabilities, including remote deposit services and mobile banking services. The Bank has three active direct subsidiaries: Bethesda Leasing, LLC, Eagle Insurance Services, LLC, and Landroval Municipal Finance, Inc.

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.

Eagle Bancorp Inc has a Value Score of 97, which is considered to be undervalued.

Eagle Bancorp Inc’s price-earnings ratio is 5.7 compared to the industry median at 8.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Eagle Bancorp Inc more attractive for value investors.

Eagle Bancorp Inc’s price-to-book ratio is higher than its peers. This could make Eagle Bancorp Inc less attractive for value investors when compared to the industry median at 0.91.

You can read more about Eagle 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.

Heritage Financial Corp’s Value Grade

Value Grade:

Heritage Financial Corporation is a bank holding company. The Company is primarily engaged in the business of planning, directing, and coordinating the business activities of its wholly owned subsidiary, Heritage Bank (the Bank). Its business consists primarily of commercial lending and deposit relationships with small and medium-sized businesses and their owners in its market areas and attracting deposits from the general public. The Company also makes real estate construction and land development loans, consumer loans and residential real estate loans for sale or investment purposes on residential properties located primarily in its market. Its lending activities are conducted through the Bank. The Bank originates construction loans for residential and for commercial and multifamily properties. The Bank conducts business from its approximately 50 branch offices located throughout Washington State, the greater Portland, Oregon area and Eugene, Oregon.

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.

Heritage Financial Corp has a Value Score of 88, which is considered to be undervalued.

Heritage Financial Corp’s price-earnings ratio is 7.5 compared to the industry median at 8.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Heritage Financial Corp more attractive for value investors.

Heritage Financial Corp’s price-to-book ratio is higher than its peers. This could make Heritage Financial Corp less attractive for value investors when compared to the industry median at 0.91.

You can read more about Heritage 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.

National Australia Bank Ltd. (ADR)’s Value Grade

Value Grade:

National Australia Bank Limited (NAB) is a financial services company. The Company's segments include the Business and Private Banking, Personal Banking, Corporate and Institutional Banking, New Zealand Banking and Corporate Functions and Other. Business and Private Banking focuses on small and medium customer segments, including specialized Agriculture, Health, Government, Education and Community services. Personal Banking provides customers with products and services provides home loans or manage personal finances through deposit, credit or personal loan facilities. Corporate and Institutional Banking provides a range of products and services including client coverage, corporate finance, markets, asset servicing, transactional banking and enterprise payments. It consists of Partnership Banking, servicing retail, business, and private customers; Corporate and Institutional Banking, servicing corporate and institutional customers, and includes Markets Sales operations in New Zealand.

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.

National Australia Bank Ltd. (ADR) has a Value Score of 74, which is considered to be undervalued.

National Australia Bank Ltd. (ADR)’s price-earnings ratio is 12.5 compared to the industry median at 8.2. This means that it has a higher price relative to its earnings compared to its peers. This makes National Australia Bank Ltd. (ADR) less attractive for value investors.

National Australia Bank Ltd. (ADR)’s price-to-book ratio is lower than its peers. This could make National Australia Bank Ltd. (ADR) more attractive for value investors when compared to the industry median at 0.91.

You can read more about National Australia Bank 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.

Provident Financial Holdings, Inc.’s Value Grade

Value Grade:

Provident Financial Holdings, Inc. is a holding company of Provident Savings Bank, F.S.B. (the Bank). The Bank is a federally chartered stock savings bank. The Bank is a financial services company serving consumers and small to mid-sized businesses in the Inland Empire region of Southern California. The Bank conducts its business operations as Provident Bank, and through its subsidiary, Provident Financial Corp. The business activities of the Bank consist of community banking, investment services and trustee services for real estate transactions. The Bank’s community banking operations primarily consist of accepting deposits from customers within the communities surrounding its full-service offices and investing those funds in single-family, multi-family, commercial real estate, construction, commercial business, consumer and other mortgage loans. The Bank conducts trustee services for its real estate transactions through Provident Financial Corp.

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.

Provident Financial Holdings, Inc. has a Value Score of 83, which is considered to be undervalued.

Provident Financial Holdings, Inc.’s price-earnings ratio is 11.5 compared to the industry median at 8.2. This means that it has a higher price relative to its earnings compared to its peers. This makes Provident Financial Holdings, Inc. less attractive for value investors.

Provident Financial Holdings, Inc.’s price-to-book ratio is higher than its peers. This could make Provident Financial Holdings, Inc. less attractive for value investors when compared to the industry median at 0.91.

You can read more about Provident Financial Holdings, 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 States Bancshares Inc’s Value Grade

Value Grade:

Southern States Bancshares, Inc. is a bank holding company that operates primarily through its wholly owned subsidiary, Southern States Bank (the Bank). The Bank is a full-service community banking institution, which offers an array of deposit, loan and other banking-related products and services to businesses and individuals in its communities. Its franchise is focused on personalized, relationship-driven service combined with local market management and expertise to serve small and medium-sized businesses and individuals. Through its Bank, the Company engages in the business of banking, which consists primarily of accepting deposits from the public and making loans and other investments. Its principal sources of funds for loans and investments at its Bank are demand, time, savings, other deposits and the amortization and prepayments of loans and investments. The Bank operates approximately 13 branches in Alabama and Georgia and two loan production offices in Atlanta.

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 States Bancshares Inc has a Value Score of 86, which is considered to be undervalued.

Southern States Bancshares Inc’s price-earnings ratio is 6.0 compared to the industry median at 8.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Southern States Bancshares Inc more attractive for value investors.

Southern States Bancshares Inc’s price-to-book ratio is lower than its peers. This could make Southern States Bancshares Inc more attractive for value investors when compared to the industry median at 0.91.

You can read more about Southern States 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.

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.

• Colony Bankcorp Inc stock has a Value Grade of A.
• Cashmere Valley Bank stock has a Value Grade of B.
• Eagle Bancorp Inc stock has a Value Grade of A.
• Heritage Financial Corp stock has a Value Grade of A.
• National Australia Bank Ltd. (ADR) stock has a Value Grade of B.
• Provident Financial Holdings, Inc. stock has a Value Grade of A.
• Southern States Bancshares Inc stock has a Value Grade of A.

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 Thursday, August 24
• Which Is a Better Investment, Cullen/Frost Bankers, Inc. or KeyCorp Stock?
• 5 Undervalued Banks Stocks for Wednesday, August 23
• Why Angel Oak Mortgage REIT Inc’s (AOMR) Stock Is Up 6.81%

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