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 Tuesday, September 05, 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.

Grupo Aval Acciones y Valores SA - ADR’s Value Grade

Value Grade:

Grupo Aval Acciones y Valores SA is a Colombia-based holding company primarily engaged, through its subsidiaries, in the acquisition, purchase and sale of stocks, bonds and other securities of companies active in the financial sector. The Company provides a variety of financial services and products across the Colombian market, ranging from traditional banking services, such as loans and deposits to pension and severance fund management, as well as the provision of legal representation services. The Company owns such subsidiaries as Banco de Bogota SA, Banco Popular SA, among others. Additionally, through its indirect and direct investments in other companies, the Company is present in the activities of investment baking and investments in the real sector, as well as the administrator of pension and severance funds in Colombia.

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.

Grupo Aval Acciones y Valores SA - ADR has a Value Score of 95, which is considered to be undervalued.

When you look at Grupo Aval Acciones y Valores SA - ADR’s price-to-sales ratio at 0.45 compared to the industry median at 2.06, this company has a lower price relative to revenue compared to its peers. This could make Grupo Aval Acciones y Valores SA - ADR’s stock more attractive for value investors.

Grupo Aval Acciones y Valores SA - ADR’s price-earnings ratio is 8.19 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 Grupo Aval Acciones y Valores SA - ADR more attractive for value investors.

Now, let’s assess Grupo Aval Acciones y Valores SA - ADR’s EV/EBITDA ratio, also known as enterprise multiple. At 10.1, 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. Grupo Aval Acciones y Valores SA - ADR’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. Grupo Aval Acciones y Valores SA - ADR’s price-to-book ratio is lower than its industry median ratio of 0.92. This could make Grupo Aval Acciones y Valores SA - ADR more attractive to investors looking for a new addition to their portfolio.

Banner Corp’s Value Grade

Value Grade:

Banner Corporation is a bank holding company for Banner Bank (the Bank). The Bank is a chartered commercial bank in the State of Washington. The Bank is a regional bank that offers a variety of commercial banking services and financial products to individuals, businesses and public sector entities in its primary market areas. The Banks primary business is that of traditional banking institutions, accepting deposits and originating loans in locations surrounding its offices in Washington, Oregon, California and Idaho. The Bank is also a participant in secondary loan markets, engaging in mortgage banking operations, through the origination and sale of one- to four-family and multifamily residential loans. Its lending activities include commercial business and commercial real estate loans, agriculture business loans, construction and land development loans, one- to four-family and multifamily residential loans, United States small business administration (SBA) loans and consumer 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.

Banner Corp has a Value Score of 82, which is considered to be undervalued.

Banner Corp’s price-earnings ratio is 7.7 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 Banner Corp more attractive for value investors.

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

You can read more about Banner 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.

Bank of South Carolina’s Value Grade

Value Grade:

The Bank of South Carolina (the Bank) operates as a state-chartered independent, community oriented, commercial bank. The Company provides a range of financial services and products to the Charleston, North Charleston metro area, which includes Charleston, Berkeley and Dorchester County. The Bank offers personal banking, business banking and mortgage services. The Bank’s personal banking services include checking, savings, certificates of deposit, health savings accounts, individual retirement accounts, VISA CheckCards, eSafe Internet banking, consumer loans, credit cards, personal reserve checking and safe deposit boxes. The Bank offers various business banking services, including eCorp Internet banking, commercial loans, credit cards, wire transfer requests, merchant credit cards services and other. The Bank offers various deposits, including non-interest-bearing demand accounts, negotiable order of withdrawal (NOW) accounts, money market accounts, time deposits and savings accounts.

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 South Carolina has a Value Score of 62, which is considered to be undervalued.

Bank of South Carolina’s price-earnings ratio is 10.1 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 Bank of South Carolina less attractive for value investors.

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

You can read more about Bank of South Carolina’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.

Pathward Financial Inc’s Value Grade

Value Grade:

Pathward Financial, Inc. is a financial holding company, which operates through its subsidiary, Pathward, N.A. (the Bank). The Bank is a full-service banking company. The Bank operates through three segments: Consumer, Commercial and Corporate Services/Other. The Consumer segment includes the backend as a service (BaaS) business line, which collaborates with partners to navigate payment and lending needs. It provides prepaid cards, deposit accounts, payment processing and consumer lending. The Commercial segment includes the Company's commercial finance business line, which helps businesses access the funds they need. Its commercial financial products range is available through the four lending solutions: working capital, equipment finance, structured finance and insurance premium finance. The Corporate Services/Other segment includes certain shared services, as well as treasury-related functions, such as the investment portfolio, warehouse finance, wholesale deposits and borrowings.

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.

Pathward Financial Inc has a Value Score of 77, which is considered to be undervalued.

Pathward Financial Inc’s price-earnings ratio is 9.2 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 Pathward Financial Inc less attractive for value investors.

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

You can read more about Pathward Financial 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.

Financial Institutions Inc’s Value Grade

Value Grade:

Financial Institutions, Inc. is a financial holding company. The Company provides a full range of banking and related financial services to consumer, commercial and municipal customers through its bank and nonbank subsidiaries. It offers a range of deposit, lending and other financial services to individuals, municipalities and businesses in Western and Central New York through its banking subsidiary, Five Star Bank. Its indirect lending network includes relationships with franchised automobile dealers in Western and Central New York, the Capital District of New York, and Northern and Central Pennsylvania. It offers insurance services through its subsidiary, SDN Insurance Agency, LLC. It offers customized investment advice, wealth management, investment consulting and retirement plan services through its subsidiaries Courier Capital, LLC and HNP Capital, LLC. It also offers banking as a service and financial technology solutions through its subsidiary Corn Hill Innovation Labs, 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.

Financial Institutions Inc has a Value Score of 97, which is considered to be undervalued.

Financial Institutions Inc’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 Financial Institutions Inc more attractive for value investors.

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

You can read more about Financial Institutions 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.

Oregon Pacific Bancorp’s Value Grade

Value Grade:

Oregon Pacific Bancorp is a bank holding company. The Company, through its subsidiary, Oregon Pacific Banking Company, doing business as Oregon Pacific Bank (the Bank), is engaged in providing banking products and services from its full-service branches in Florence, Eugene, Coos Bay, Roseburg, and Medford and a loan production office in Portland. The Bank also offers trust services in Florence, Coos Bay, Medford, and Eugene. The Bank specializes in offering comprehensive financial services to local families and business owners, which includes checking, savings, money market, and time deposit accounts. The Bank also offers a variety of lending services, including commercial, consumer, and credit cards. Its merchant services department handles payment processing solutions for business clients. Its technology services include Internet banking, online bill pay, and mobile banking services. It also provides wealth management and investment services that offer non-deposit products.

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.

Oregon Pacific Bancorp has a Value Score of 76, which is considered to be undervalued.

Oregon Pacific Bancorp’s price-earnings ratio is 5.6 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 Oregon Pacific Bancorp more attractive for value investors.

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

You can read more about Oregon Pacific 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.

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 77, which is considered to be undervalued.

Timberland Bancorp Inc’s price-earnings ratio is 8.8 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 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.

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.

• Grupo Aval Acciones y Valores SA - ADR stock has a Value Grade of A.
• Banner Corp stock has a Value Grade of A.
• Bank of South Carolina stock has a Value Grade of B.
• Pathward Financial Inc stock has a Value Grade of B.
• Financial Institutions Inc stock has a Value Grade of A.
• Oregon Pacific Bancorp stock has a Value Grade of B.
• Timberland 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 Tuesday, September 05
• What You Need to Know About VersaBank's Q3 Earnings
• 5 Undervalued Banks Stocks for Monday, September 04
• What You Need to Know About Bank of Montreal'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.