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 Wednesday, September 13, 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.

Berkshire Hills Bancorp Inc’s Value Grade

Value Grade:

Berkshire Hills Bancorp, Inc. is a holding company for Berkshire Bank (the Bank). The Bank is engaged in providing business and consumer banking, mortgage, wealth management, and investment services. The Bank's loan portfolio consists of commercial real estate loan, commercial and industrial loans (C&I;), residential mortgages loan, and consumer loans. The Bank offers a variety of deposit accounts with a range of interest rates and terms. The Bank?s deposit accounts consist of demand deposits (non-interest-bearing checking), NOW (interest-bearing checking), regular savings, money market savings, and time certificates of deposit. Its Wealth Management Group provides consultative investment management, trust administration, and financial planning to individuals, businesses, and institutions. It also offers interest rate swaps to commercial loan customers and backs these swaps with offsetting swaps. It serves approximately 100 full-service financial centers its New England and New York.

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.

Berkshire Hills Bancorp Inc has a Value Score of 90, which is considered to be undervalued.

When you look at Berkshire Hills Bancorp Inc’s price-to-sales ratio at 1.73 compared to the industry median at 2.01, this company has a lower price relative to revenue compared to its peers. This could make Berkshire Hills Bancorp Inc’s stock more attractive for value investors.

Berkshire Hills Bancorp Inc’s price-earnings ratio is 8.75 compared to the industry median at 8.01. This means it has a higher share price relative to earnings compared to its peers. This could make Berkshire Hills Bancorp Inc less attractive for value investors.

Now, let’s assess Berkshire Hills Bancorp Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 5.2, 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. Berkshire Hills Bancorp Inc’s shareholder yield is higher than its industry median ratio of 4.13%. 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. Berkshire Hills Bancorp Inc’s price-to-book ratio is lower than its industry median ratio of 0.91. This could make Berkshire Hills Bancorp Inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Berkshire Hills Bancorp Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Berkshire Hills Bancorp Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 8.74. This could make Berkshire Hills Bancorp Inc more attractive because the lower P/FCF ratio indicates that Berkshire Hills Bancorp Inc 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.

Canadian Imperial Bank of Commerce (USA)’s Value Grade

Value Grade:

Canadian Imperial Bank of Commerce is a Canada-based financial institution. The Company offers a full range of advice, solutions and services through its digital banking network across personal and business banking, commercial banking and wealth management, and capital markets businesses. Its personal banking offers products and services, including personal checking, health savings account, personal lending, EasyPath banking, personal savings, retirement, traditions club and mortgage. Its private wealth offers investment management, corporate and institutional services, wealth planning and trustee services and private banking. The Company’s commercial banking includes commercial lending, capital markets, commercial real estate and treasury management. It also includes small business banking and agility digital banking. The Company has over 13 million personal banking, business, public sector and institutional clients.

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.

Canadian Imperial Bank of Commerce (USA) has a Value Score of 77, which is considered to be undervalued.

Canadian Imperial Bank of Commerce (USA)’s price-earnings ratio is 11.1 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 Canadian Imperial Bank of Commerce (USA) less attractive for value investors.

Canadian Imperial Bank of Commerce (USA)’s price-to-book ratio is lower than its peers. This could make Canadian Imperial Bank of Commerce (USA) more attractive for value investors when compared to the industry median at 0.91.

You can read more about Canadian Imperial Bank of Commerce (USA)’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 Ottawa Bancshares Inc’s Value Grade

Value Grade:

First Ottawa Bancshares, Inc. is a bank holding company. The Company’s principal activity is the ownership and management of its subsidiary, American Commercial Bank & Trust, National Association (the Bank). The Bank is primarily engaged in providing a full range of banking and financial services to individual and corporate customers in LaSalle, Grundy, Cook, and surrounding counties in Illinois. Its portfolio segments include commercial real estate, commercial non-real estate, construction, and land development, agricultural, residential, and consumer. The Bank's business banking includes business accounts, cash management, commercial lending, and farm management and agricultural lending. Its personal banking includes checking and savings, certificate of deposits and individual retirement accounts (IRAs), consumer lending, online and mobile banking, safe deposit boxes, and wealth management services. Its residential lending services include Residential Loans and Home Equity 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.

First Ottawa Bancshares Inc has a Value Score of 63, which is considered to be undervalued.

First Ottawa Bancshares Inc’s price-earnings ratio is 6.7 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 First Ottawa Bancshares Inc more attractive for value investors.

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

You can read more about First Ottawa Bancshares 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.

Inter & Co Inc’s Value Grade

Value Grade:

Inter & Co Inc is a Brazil-based company that developed a global payments platform combining a fully digital backbone with integration with other payments platforms. The Company's objective is to operate as a digital multi-service bank for individuals and companies, and among its main activities are real estate loans, payroll credit, credit for companies, rural loans, credit card operations, checking account, investments, insurance services, as well as a marketplace of non-financial services provided by means of its subsidiaries. The Company helps their customers to manage their money, providing a complete digital checking account where the Group can deliver a broad range of financial solutions through the Super App. Through the Super App, Inter & Co Inc's clients can shop on-line in a high variety of stores, as well as purchase, for example a plane ticket and book hotels.

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.

Inter & Co Inc has a Value Score of 63, which is considered to be undervalued.

Inter & Co Inc’s price-earnings ratio is 133.2 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 Inter & Co Inc less attractive for value investors.

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

You can read more about Inter & Co 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.

Third Coast Bancshares Inc’s Value Grade

Value Grade:

Third Coast Bancshares, Inc. is a bank holding company. The Company operates primarily in the Greater Houston, Dallas-Fort Worth, and Austin-San Antonio markets through its wholly owned subsidiary, Third Coast Bank, SSB. It focuses on providing commercial banking solutions to small and medium-sized businesses and professionals with operations in its markets. Its deposits include checking accounts, money market accounts, savings accounts, a variety of certificates of deposit and individual retirement accounts. It provides a range of banking services, such as retail and commercial online banking platforms, mobile banking apps, debit cards, credit cards, a suite of treasury management solutions, merchant card services and customer digital solutions. Its investment portfolio includes state and municipal securities, mortgage-backed securities, agency collateralized mortgage obligations, United States treasury bonds, and corporate bonds. It conducts banking operations through 16 branches.

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.

Third Coast Bancshares Inc has a Value Score of 80, which is considered to be undervalued.

Third Coast Bancshares Inc’s price-earnings ratio is 9.9 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 Third Coast Bancshares Inc less attractive for value investors.

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

You can read more about Third Coast Bancshares 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.

Tri City Bankshares Corp’s Value Grade

Value Grade:

Tri City Bankshares Corporation is a bank holding company. The Company offers a range of financial products and services to external customers, including accepting deposits and originating residential, consumer and commercial loans. The Company operates through the community banking segment. Its wholly owned subsidiary is Tri City National Bank (the Bank). The Bank's personal banking services include checking accounts, savings and certificate of deposits, health savings accounts, individual retirement accounts, credit cards, and investments. The Bank's business banking services include business loans, business checking, business savings and certificate of deposits, health savings account (HSA) for employers, business credit cards, business services, business fraud prevention, and municipal banking. The Bank's mortgages and loans include mortgages, auto loans, personal loans, and business loans. The Bank's additional services include safe deposit boxes, gift cards, 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.

Tri City Bankshares Corp has a Value Score of 84, which is considered to be undervalued.

Tri City Bankshares Corp’s price-earnings ratio is 7.8 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 Tri City Bankshares Corp more attractive for value investors.

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

You can read more about Tri City Bankshares 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.

WesBanco Inc’s Value Grade

Value Grade:

Wesbanco, Inc. is a bank holding company of Wesbanco Bank, Inc. (the Bank). The Company offers a range of financial services, including retail banking, corporate banking, personal and corporate trust services, brokerage services, mortgage banking and insurance. It offers its services through two segments: Community Banking and Trust and Investment Services. Its Community Banking segment offers services traditionally offered by full-service commercial banks, including commercial demand, individual demand and time deposit accounts, as well as commercial, mortgage and individual installment loans, and certain non-traditional offerings, such as insurance and securities brokerage services. The Trust and Investment Services segment offers trust services, as well as various alternative investment products, including mutual funds. The Bank operates approximately 194 branches and 188 ATM machines in West Virginia, Ohio, western Pennsylvania, Kentucky, southern Indiana and Maryland.

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.

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

WesBanco Inc’s price-earnings ratio is 8.0 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 WesBanco Inc fairly attractive for value investors.

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

You can read more about WesBanco 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.

• Berkshire Hills Bancorp Inc stock has a Value Grade of A.
• Canadian Imperial Bank of Commerce (USA) stock has a Value Grade of B.
• First Ottawa Bancshares Inc stock has a Value Grade of B.
• Inter & Co Inc stock has a Value Grade of B.
• Third Coast Bancshares Inc stock has a Value Grade of B.
• Tri City Bankshares Corp stock has a Value Grade of A.
• WesBanco 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 Wednesday, September 13
• 3 Undervalued Banks Stocks for Tuesday, September 12
• Why Bancolombia SA (ADR)’s (CIB) Stock Is Up 4.29%
• Why Intercorp Financial Services Inc’s (IFS) Stock Is Up 4.26%

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