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 25, 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.

Bank of Marin Bancorp’s Value Grade

Value Grade:

Bank of Marin Bancorp is the holding company for Bank of Marin (the Bank). Its business banking focus is on small to medium-sized businesses, not-for-profit organizations, and commercial real estate investors. It offers a suite of business and personal financial products designed to meet the needs of its customers. Its lending categories include commercial real estate loans, commercial and industrial loans, including small business loans, construction financing, consumer loans, and home equity lines of credit. It offers a variety of personal and business checking and savings accounts, and a number of time deposit alternatives, including time certificates of deposit, Individual Retirement Accounts, Health Savings Accounts, Certificate of Deposit Account Registry Service, Insured Cash Sweep, and Demand Deposit Marketplace accounts. It offers deposit options, including mobile deposit, remote deposit capture, Automated Clearing House services, wire transfers, and image lockbox 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.

Bank of Marin Bancorp has a Value Score of 89, which is considered to be undervalued.

When you look at Bank of Marin Bancorp’s price-to-sales ratio at 2.21 compared to the industry median at 2.04, this company has a higher price relative to revenue compared to its peers. This could make Bank of Marin Bancorp’s stock less attractive for value investors.

Bank of Marin Bancorp’s price-earnings ratio is 7.74 compared to the industry median at 8.17. This means it has a lower share price relative to earnings compared to its peers. This could make Bank of Marin Bancorp more attractive for value investors.

Now, let’s assess Bank of Marin Bancorp’s EV/EBITDA ratio, also known as enterprise multiple. At 3.8, 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. Bank of Marin Bancorp’s shareholder yield is higher than its industry median ratio of 4.05%. 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. Bank of Marin Bancorp’s price-to-book ratio is lower than its industry median ratio of 0.91. This could make Bank of Marin Bancorp more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Bank of Marin Bancorp’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Bank of Marin Bancorp’s price-to-free-cash-flow ratio is lower than its industry median ratio of 8.86. This could make Bank of Marin Bancorp more attractive because the lower P/FCF ratio indicates that Bank of Marin 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.

Botetourt Bankshares Inc’s Value Grade

Value Grade:

Botetourt Bankshares, Inc. is a holding company, which operates through its subsidiary, Bank of Botetourt (the Bank). The Bank is a state-chartered bank, which provides full banking services through its 13 branch offices in Botetourt, Roanoke, Rockbridge, and Franklin counties, the City of Salem, and the Town of Vinton, all in Virginia. The Bank’s segments include Commercial Loans, Commercial Real Estate Loans, Consumer Loans, Residential-Prime Loans, and Agricultural and Raw Land Loans. The Commercial Loans segment consists of motor vehicle loans, savings account loans, personal lines of credit, overdrafts, other types of secured consumer loans and unsecured personal loans. The Commercial Real Estate Loans segment includes owner-occupied, non-owner-occupied and multi-family dwellings. The Residential-Prime Loan segment consists of fixed-rate and adjustable-rate single-family amortizing term loans. The Agricultural and Raw Land Loans segment is for farm loans and for undeveloped land.

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.

Botetourt Bankshares Inc has a Value Score of 79, which is considered to be undervalued.

Botetourt Bankshares Inc’s price-earnings ratio is 6.8 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 Botetourt Bankshares Inc more attractive for value investors.

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

You can read more about Botetourt Bankshares 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.

Northfield Bancorp Inc’s Value Grade

Value Grade:

Northfield Bancorp, Inc. is the holding company for Northfield Bank (the Bank). The Bank is a federally chartered savings bank. The Bank principal business consists of originating commercial real estate loans, construction and land loans, commercial and industrial loans, and home equity loans and lines of credit. It offers a variety of deposit accounts, including certificates of deposit, passbook, statement, and money market savings accounts, transaction deposit accounts negotiable orders of withdrawal accounts and interest and non-interest-bearing demand accounts, individual retirement accounts, and brokered deposits. Its principal lending activity is the origination of multifamily real estate loans and, to a lesser extent, other commercial real estate loans, in New York City, New Jersey, and eastern Pennsylvania. It also originates one-to-four family residential real estate loans, construction and land loans, commercial and industrial loans, 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.

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

Northfield Bancorp Inc’s price-earnings ratio is 9.3 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 Northfield Bancorp Inc less attractive for value investors.

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

You can read more about Northfield 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.

Penns Woods Bancorp, Inc.’s Value Grade

Value Grade:

Penns Woods Bancorp, Inc. is a bank holding company. The Company is engaged in managing and supervising the Banks. The Company operates, through its subsidiaries, namely Jersey Shore State Bank (JSSB) and Luzerne Bank (Luzerne) (the Banks). The Banks are engaged in commercial and retail banking. The Services offered by the Banks include accepting time, demand and savings deposits including Super NOW accounts, statement savings accounts, money market accounts, and fixed rate certificates of deposit. Its other services also include making secured and unsecured business and consumer loans that include financing commercial transactions as well as construction and residential mortgage loans and revolving credit loans with overdraft protection. The Bank's loan portfolio includes commercial and agricultural, real estate, and consumer. Its subsidiaries also include Woods Real Estate Development Co., Inc., Woods Investment Company, Inc., The M Group Inc. and United Insurance Solutions, LLC.

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.

Penns Woods Bancorp, Inc. has a Value Score of 80, which is considered to be undervalued.

Penns Woods Bancorp, Inc.’s price-earnings ratio is 9.6 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 Penns Woods Bancorp, Inc. less attractive for value investors.

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

You can read more about Penns Woods 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.

RBB Bancorp’s Value Grade

Value Grade:

RBB Bancorp is a financial holding company. RBB Bancorp?s principal business is to serve its subsidiaries, including Royal Business Bank (the Bank) and RBB Asset Management Company (RAM). The Bank provides business-banking services to the Asian-American communities. Specific services include remote deposit, E-banking, mobile banking, commercial and investor real estate loans, business loans and lines of credit, Small Business Administration (SBA) 7A and 504 loans, mortgage loans, trade finance, and a range of depository accounts. The Bank operates approximately 24 branches across two separate regions: the Western region with branches in Los Angeles County, California; Orange County, California; Ventura County, California; Clark County, Nevada; and Honolulu, Hawaii; and its Eastern region with branches in Manhattan, Brooklyn and Queens, New York; Chicago, Illinois and Edison, New Jersey. It operates two branches in Ventura County, California, in Westlake Village and in Oxnard.

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.

RBB Bancorp has a Value Score of 98, which is considered to be undervalued.

RBB Bancorp’s price-earnings ratio is 4.7 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 RBB Bancorp more attractive for value investors.

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

You can read more about RBB 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.

Village Bank and Trust Financial Corp.’s Value Grade

Value Grade:

Village Bank and Trust Financial Corp. is a bank holding company. The Company has three wholly owned subsidiaries: Village Bank (the Bank), Southern Community Financial Capital Trust I, and Village Financial Statutory Trust II. It operates through two segments: traditional commercial banking and mortgage banking. The traditional commercial banking segment provides the mortgage banking segment with the short-term funds needed to originate mortgage loans through a warehouse line of credit. Additionally, the mortgage banking segment leases premises from the commercial banking segment. The Bank is the primary operating business of the Company. The Bank offers a range of banking and related financial services, including checking, savings, certificates of deposit and other depository services, and commercial, real estate and consumer loans, primarily in the Richmond, Virginia and Williamsburg, Virginia metropolitan areas. The Bank provides its customers with personal customized service.

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.

Village Bank and Trust Financial Corp. has a Value Score of 61, which is considered to be undervalued.

Village Bank and Trust Financial Corp.’s price-earnings ratio is 9.7 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 Village Bank and Trust Financial Corp. less attractive for value investors.

Village Bank and Trust Financial Corp.’s price-to-book ratio is lower than its peers. This could make Village Bank and Trust Financial Corp. more attractive for value investors when compared to the industry median at 0.91.

You can read more about Village Bank and Trust 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.

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.

• Bank of Marin Bancorp stock has a Value Grade of A.
• Botetourt Bankshares Inc stock has a Value Grade of B.
• Northfield Bancorp Inc stock has a Value Grade of B.
• Penns Woods Bancorp, Inc. stock has a Value Grade of B.
• RBB Bancorp stock has a Value Grade of A.
• Village Bank and Trust Financial Corp. 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 Friday, August 25
• What You Need to Know About Royal Bank of Canada's Q3 Earnings
• What You Need to Know About Toronto-Dominion Bank's Q3 Earnings
• 7 Undervalued Banks Stocks for Thursday, August 24

AAII Disclaimer

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