Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 4 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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4 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 4 undervalued stocks in the Banks industry for Wednesday, September 06, 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.

First National Bank Alaska’s Value Grade

Value Grade:

First National Bank Alaska (the Bank) is a full-service commercial bank. Its principal activities include the receiving and lending of money. Additionally, the Bank provides trust banking services, escrow and contract collection services, bank card services, and safe deposit box facilities. These services are for businesses, industry, and individuals primarily within the state of Alaska. Its banking services are provided from over approximately 27 branches throughout Alaska. Its products include checking accounts, savings accounts, money market deposits, safe deposit services, certificate of deposit (CD) and individual retirement account (IRA), convenience banking, and online and mobile banking. It provides Mastercard Debit Cards, Mastercard Credit Cards, merchant services, cash flow solutions, escrow servicing, wealth management, business newsletter, treasury management, and workshop webinars. It provides federal housing administration loans and veterans administration loan program.

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 National Bank Alaska has a Value Score of 62, which is considered to be undervalued.

When you look at First National Bank Alaska’s price-to-sales ratio at 4.08 compared to the industry median at 2.03, this company has a higher price relative to revenue compared to its peers. This could make First National Bank Alaska’s stock less attractive for value investors.

First National Bank Alaska’s price-earnings ratio is 10.57 compared to the industry median at 8.14. This means it has a higher share price relative to earnings compared to its peers. This could make First National Bank Alaska less 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. First National Bank Alaska’s shareholder yield is higher than its industry median ratio of 4.09%. 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. First National Bank Alaska’s price-to-book ratio is higher than its industry median ratio of 0.91. This could make First National Bank Alaska less attractive to investors looking for a new addition to their portfolio.

First Horizon Corp’s Value Grade

Value Grade:

First Horizon Corporation is a bank holding company, which provides diversified financial services primarily through its principal subsidiary, First Horizon Bank (the Bank). The Company's segments include Regional Banking, Specialty Banking and Corporate. The Regional Banking segment offers financial products and services, including traditional lending and deposit taking, to consumer and commercial clients primarily in the southern United States and other selected markets. This segment also provides investment, wealth management, financial planning, trust and asset management services for consumer clients. The Specialty Banking segment consists of specialty banking lines of business, which includes asset-based lending, mortgage warehouse lending, commercial real estate, franchise finance, correspondent banking, equipment finance, mortgage, and title insurance. This segment also delivers treasury management solutions, loan syndications, and international banking.

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

First Horizon Corp’s price-earnings ratio is 6.6 compared to the industry median at 8.1. This means that it has a lower price relative to its earnings compared to its peers. This makes First Horizon Corp more attractive for value investors.

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

You can read more about First Horizon 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.

Pinnacle Financial Partners Inc’s Value Grade

Value Grade:

Pinnacle Financial Partners, Inc. is a financial holding company. The Company operates through its wholly owned subsidiary, Pinnacle Bank (the Bank). The Bank is a Tennessee state-chartered bank. The Bank offers a full range of lending products, including commercial, real estate and consumer loans to individuals, businesses and professional entities. The Bank is also focused on offering core deposits, including savings, noninterest-bearing checking, interest-bearing checking, money market and certificate of deposit accounts, including access to products offered through various IntraFi Network Deposit programs. It also offers a range of treasury management and remote deposit services, including online wire origination, zero balance and sweep accounts, automated bill pay services, and lockbox processing. It operates approximately 123 offices, including 51 in Tennessee, 38 in North Carolina, 20 in South Carolina, 10 in Virginia, two in Georgia and two in Alabama.

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.

Pinnacle Financial Partners Inc has a Value Score of 74, which is considered to be undervalued.

Pinnacle Financial Partners Inc’s price-earnings ratio is 8.6 compared to the industry median at 8.1. This means that it has a higher price relative to its earnings compared to its peers. This makes Pinnacle Financial Partners Inc less attractive for value investors.

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

You can read more about Pinnacle Financial Partners 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.

Regions Financial Corp’s Value Grade

Value Grade:

Regions Financial Corporation is a financial solutions provider to a range of clients, including retail and mortgage banking services, commercial banking services and wealth and investment services. The Company conducts its banking operations through Regions Bank, which is a commercial bank. It also delivers specialty capabilities, including merger and acquisition advisory services, capital market solutions, home improvement lending and others. Its segments include Corporate Bank segment, which operates commercial banking functions including commercial and industrial, commercial real estate and investor real estate lending; Consumer Bank segment, which is engaged in consumer banking products and services related to residential first mortgages, home equity lines and loans, consumer credit cards, and other consumer loans, and Wealth Management segment offers credit related products, trust and investment management, asset management, retirement and savings solutions, and estate planning.

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.

Regions Financial Corp has a Value Score of 74, which is considered to be undervalued.

Regions Financial Corp’s price-earnings ratio is 7.8 compared to the industry median at 8.1. This means that it has a lower price relative to its earnings compared to its peers. This makes Regions Financial Corp more attractive for value investors.

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

You can read more about Regions 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 4 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.

• First National Bank Alaska stock has a Value Grade of B.
• First Horizon Corp stock has a Value Grade of A.
• Pinnacle Financial Partners Inc stock has a Value Grade of B.
• Regions Financial Corp stock has a Value Grade of B.

Now that you have a bit more background about each of the 4 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.

• 4 Undervalued Banks Stocks for Wednesday, September 06
• What You Need to Know About Canadian Imperial Bank of Commerce (USA)'s Q3 Earnings
• Which Is a Better Investment, Bancolombia SA (ADR) or Bancorp Inc Stock?
• 7 Undervalued Banks Stocks for Tuesday, September 05

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.