Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 5 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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5 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 5 undervalued stocks in the Banks industry for Monday, September 04, 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.

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 80, which is considered to be undervalued.

When you look at Botetourt Bankshares Inc’s price-to-sales ratio at 1.91 compared to the industry median at 2.06, this company has a lower price relative to revenue compared to its peers. This could make Botetourt Bankshares Inc’s stock more attractive for value investors.

Botetourt Bankshares Inc’s price-earnings ratio is 6.78 compared to the industry median at 8.22. This means it has a lower share price relative to earnings compared to its peers. This could make Botetourt Bankshares Inc more attractive for value investors.

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. Botetourt Bankshares Inc’s shareholder yield is lower 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. Botetourt Bankshares Inc’s price-to-book ratio is lower than its industry median ratio of 0.92. This could make Botetourt Bankshares Inc more attractive to investors looking for a new addition to their portfolio.

Carter Bankshares Inc’s Value Grade

Value Grade:

Carter Bankshares, Inc. is a bank holding company. The Company is the parent company of its wholly owned subsidiary, Carter Bank & Trust (the Bank). The Bank is an insured, Virginia state-chartered bank, which operates branches in Virginia and North Carolina. The Company provides a full range of financial services with retail, and commercial banking products and insurance. The Company?s segments include Commercial Real Estate (CRE), Commercial and Industrial (C&I;), Residential Mortgages and Construction. The Company offers digital banking options through its website. Its customers can utilize online and mobile banking tools and its customer contact center for personal and automated telephone banking services. Its Retail branches offers lobby appointments, drive-up and virtual servicing. The Company has approximately 67 branches in Virginia and North Carolina.

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.

Carter Bankshares Inc has a Value Score of 92, which is considered to be undervalued.

Carter Bankshares Inc’s price-earnings ratio is 6.6 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 Carter Bankshares Inc more attractive for value investors.

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

You can read more about Carter 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.

First Bancorp Inc’s Value Grade

Value Grade:

The First Bancorp, Inc. is a bank holding company of First National Bank (the Bank). The Company, through its Bank, provides a range of banking services to individual and corporate customers from eighteen offices in coastal and eastern Maine. Its services include demand, time, and savings deposits; lending; payment processing; and investment management and trust services. The Company, through First National Wealth Management, a division of the Bank, offers private banking, financial planning, investment management and trust services to individuals, businesses, non-profit organizations and municipalities. Its investment securities are classified into three categories: securities available for sale, securities to be held to maturity and restricted equity securities. It offers a range of loans, including commercial real estate loan, commercial construction loans, municipal loans, residential real estate term loan, home equity line of credit, consumer loan, construction loans among 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.

First Bancorp Inc has a Value Score of 77, which is considered to be undervalued.

First Bancorp Inc’s price-earnings ratio is 7.9 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 First Bancorp Inc more attractive for value investors.

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

You can read more about First 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.

First United Corp’s Value Grade

Value Grade:

First United Corporation is a bank holding company. The Company's business is serving as the parent company of First United Bank & Trust (the Bank), First United Statutory Trust I, and First United Statutory Trust II. The Bank offers a range of services, such as checking, savings, money market deposit accounts, and certificates of deposit, business loans, personal loans, mortgage loans, lines of credit, and consumer-oriented retirement accounts including individual retirement accounts (IRAs) and employee benefit accounts. In addition, the Bank provides full brokerage services through a networking arrangement with Cetera Investment Services, LLC., a full-service broker-dealer. The Bank also provides safe deposit and night depository facilities, insurance products and trust services. The Bank operates approximately 26 banking offices, one customer care center and 34 Automated Teller Machines (ATMs) in Allegany County, Frederick County, Garrett County, Washington County, 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.

First United Corp has a Value Score of 96, which is considered to be undervalued.

First United Corp’s price-earnings ratio is 4.9 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 First United Corp more attractive for value investors.

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

You can read more about First United 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.

Merchants & Marine Bancorp Inc’s Value Grade

Value Grade:

Merchants & Marine Bancorp, Inc. is a holding company of Merchants & Marine Bank (the Bank). The Company’s principal activity is the ownership and management of the Bank. The Bank generates commercial, mortgage and consumer loans and receives deposits from customers located in Jackson, George, Lamar and Forrest Counties in Mississippi and Baldwin and Mobile Counties in Alabama. The Bank operates under a state bank charter and provides full banking services. Canvas Mortgage, a division of the Bank, originates mortgage loans for sale in the secondary market. The Bank offers a portfolio of loans, which include residential real estate, nonresidential real estate, consumer, commercial and other.

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.

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

Merchants & Marine Bancorp Inc’s price-earnings ratio is 12.1 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 Merchants & Marine Bancorp Inc less attractive for value investors.

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

You can read more about Merchants & Marine 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 5 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.

• Botetourt Bankshares Inc stock has a Value Grade of B.
• Carter Bankshares Inc stock has a Value Grade of A.
• First Bancorp Inc stock has a Value Grade of B.
• First United Corp stock has a Value Grade of A.
• Merchants & Marine Bancorp Inc stock has a Value Grade of B.

Now that you have a bit more background about each of the 5 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.

• 5 Undervalued Banks Stocks for Monday, September 04
• What You Need to Know About Bank of Montreal's Q3 Earnings
• What You Need to Know About Bank of Nova Scotia's Q3 Earnings
• What You Need to Know About Canadian Imperial Bank of Commerce (USA)'s Q3 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.