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, September 08, 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.

Bar Harbor Bankshares’s Value Grade

Value Grade:

Bar Harbor Bankshares is the parent company of Bar Harbor Bank & Trust (the Bank). The Bank is a regional community bank, which offers a variety of financial products and services designed around its customers to serve their banking and financial needs. The Bank provides traditional community banking services, including lending activities, acceptance of demand, savings and time deposits, business services, investment management, trust, and third-party brokerage services. The Bank has one wholly owned subsidiary that provides an array of fiduciary services, including trust and estate administration, wealth advisory services, and investment management services to individuals, businesses, not-for-profit organizations, and municipalities. The Bank serves affluent and growing markets in Maine, New Hampshire, and Vermont. The Bank has about 22 full-service branches in operation and two wealth management offices principally located in the regions of downeast, midcoast and central Maine.

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.

Bar Harbor Bankshares has a Value Score of 70, which is considered to be undervalued.

When you look at Bar Harbor Bankshares’s price-to-sales ratio at 2.38 compared to the industry median at 2.00, this company has a higher price relative to revenue compared to its peers. This could make Bar Harbor Bankshares’s stock less attractive for value investors.

Bar Harbor Bankshares’s price-earnings ratio is 7.70 compared to the industry median at 7.97. This means it has a lower share price relative to earnings compared to its peers. This could make Bar Harbor Bankshares more attractive for value investors.

Now, let’s assess Bar Harbor Bankshares’s EV/EBITDA ratio, also known as enterprise multiple. At 10.0, when compared to the industry median of 5.0, 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. Bar Harbor Bankshares’s shareholder yield is lower than its industry median ratio of 4.15%. 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. Bar Harbor Bankshares’s price-to-book ratio is higher than its industry median ratio of 0.89. This could make Bar Harbor Bankshares fairly attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Bar Harbor Bankshares’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Bar Harbor Bankshares’s price-to-free-cash-flow ratio is higher than its industry median ratio of 8.77. This could make Bar Harbor Bankshares less attractive because the higher P/FCF ratio indicates that Bar Harbor Bankshares 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.

First Bancshares Inc (Missouri)’s Value Grade

Value Grade:

First Bancshares, Inc. is a holding company for Stockmens Bank (the Bank). The Bank provides its customers with a range of community banking services. The Bank is engaged in the business of attracting deposits from, and making loans to, the general public, including individuals and businesses. It originates real estate loans, including one-to-four family residential mortgage loans, multi-family residential loans, commercial real estate loans, agricultural real estate loans and home equity loans and non-real estate loans, including commercial business, agricultural business and consumer loans. It also invests in mortgage-back securities, United States Government and agency securities and other assets. It conducts its business from its home office in Colorado Springs, Colorado, and eight full-service Missouri offices in Mountain Grove, Marshfield, Ava, Kissee, Mills, Gainesville, Crane, Hartville and Springfield, and full-service offices in Bartley, Nebraska and Akron, Colorado.

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 Bancshares Inc (Missouri) has a Value Score of 71, which is considered to be undervalued.

First Bancshares Inc (Missouri)’s price-earnings ratio is 9.8 compared to the industry median at 8.0. This means that it has a higher price relative to its earnings compared to its peers. This makes First Bancshares Inc (Missouri) less attractive for value investors.

First Bancshares Inc (Missouri)’s price-to-book ratio is lower than its peers. This could make First Bancshares Inc (Missouri) more attractive for value investors when compared to the industry median at 0.89.

You can read more about First Bancshares Inc (Missouri)’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.

Finward Bancorp’s Value Grade

Value Grade:

Finward Bancorp (Bancorp) is the holding company for Peoples Bank (the Bank), which is an Indiana-chartered commercial bank. The Bancorp?s lending activities include residential mortgage loans, construction loans, commercial real estate loans, consumer loans, commercial business loans and loans to municipalities. The Bank also offers a range of deposit instruments, including non-interest-bearing demand accounts, interest bearing demand accounts, savings accounts, money market deposit accounts, certificate accounts and retirement savings plans. Its wealth management group provides estate and retirement planning, guardianships, land trusts, profit sharing and 401(k) retirement plans, individual retirement accounts (IRAs) and Keogh accounts, investment agency accounts, and serves as the personal representative of estates, and acts as trustee for revocable and irrevocable trusts. Its primary market areas include Lake and Porter Counties, in Northwest Indiana, and Cook County, Illinois.

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.

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

Finward Bancorp’s price-earnings ratio is 6.9 compared to the industry median at 8.0. This means that it has a lower price relative to its earnings compared to its peers. This makes Finward Bancorp more attractive for value investors.

Finward Bancorp’s price-to-book ratio is higher than its peers. This could make Finward Bancorp less attractive for value investors when compared to the industry median at 0.89.

You can read more about Finward 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.

Horizon Bancorp Inc’s Value Grade

Value Grade:

Horizon Bancorp, Inc. is a bank holding company. The Company provides a range of banking services in northern and central Indiana and southern and central Michigan through its subsidiary, Horizon Bank (the Bank) and Horizon Risk Management, Inc. The Company operates through the commercial banking segment. The Bank is a full-service commercial bank that offers a range of commercial and retail banking and other services incident to banking along with a trust department that offers corporate and individual trust and agency services and investment management services. The Bank maintains approximately 71 full-service offices. Its wholly owned subsidiary, Horizon Risk Management, Inc., is a captive insurance company. Its loan portfolio consists of commercial loans, real estate loans, mortgage warehouse loans and consumer loans. The Bank?s deposits products include noninterest-bearing demand deposits, interest bearing demand deposits, savings deposits, money market and time deposits.

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.

Horizon Bancorp Inc has a Value Score of 81, which is considered to be undervalued.

Horizon Bancorp Inc’s price-earnings ratio is 5.7 compared to the industry median at 8.0. This means that it has a lower price relative to its earnings compared to its peers. This makes Horizon Bancorp Inc more attractive for value investors.

Horizon Bancorp Inc’s price-to-book ratio is higher than its peers. This could make Horizon Bancorp Inc less attractive for value investors when compared to the industry median at 0.89.

You can read more about Horizon 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.

Security National Financial Corp’s Value Grade

Value Grade:

Security National Financial Corporation is a life insurance company that operates Life Insurance, Cemetery and Mortuary, and Mortgages segments. The Life Insurance segment is engaged in the business of selling and servicing selected lines of life insurance, annuity products, and accident and health insurance. The Cemetery and Mortuary segment consists of eight mortuaries and five cemeteries in the state of Utah, one cemetery in the state of California, and one cemetery and four mortuaries in the state of New Mexico. The Company is also engaged in pre-need selling of funeral, cemetery, mortuary, and cremation services through its Utah, California, and New Mexico operations. The Mortgage segment originates and underwrites or otherwise purchases residential and commercial loans for new construction, existing homes, and other real estate projects primarily in Florida, Nevada, Texas, and Utah. The Mortgage segment operates through approximately 118 retail offices in approximately 26 states.

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.

Security National Financial Corp has a Value Score of 92, which is considered to be undervalued.

Security National Financial Corp’s price-earnings ratio is 6.8 compared to the industry median at 8.0. This means that it has a lower price relative to its earnings compared to its peers. This makes Security National Financial Corp more attractive for value investors.

Security National Financial Corp’s price-to-book ratio is higher than its peers. This could make Security National Financial Corp less attractive for value investors when compared to the industry median at 0.89.

You can read more about Security National 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.

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 62, which is considered to be undervalued.

Village Bank and Trust Financial Corp.’s price-earnings ratio is 9.6 compared to the industry median at 8.0. 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 0.89.

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.

• Bar Harbor Bankshares stock has a Value Grade of B.
• First Bancshares Inc (Missouri) stock has a Value Grade of B.
• Finward Bancorp stock has a Value Grade of A.
• Horizon Bancorp Inc stock has a Value Grade of A.
• Security National Financial Corp 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, September 08
• 4 Undervalued Banks Stocks for Thursday, September 07
• Why Citizens & Northern Corporation’s (CZNC) Stock Is Down 4.26%
• Why First Foundation Inc’s (FFWM) Stock Is Down 4.03%

AAII Disclaimer

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