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 15, 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.

Associated Banc-Corp’s Value Grade

Value Grade:

Associated Banc-Corp is a bank holding company. The Company, through Associated Bank and various nonbanking subsidiaries, provides a range of banking and nonbanking products and services to individuals and businesses. It offers a range of financial products, serving approximately 100 communities throughout Wisconsin, Illinois and Minnesota. Its segments include Corporate and Commercial Specialty; Community, Consumer, and Business; and Risk Management and Shared Services. The Corporate and Commercial Specialty consists of lending and deposit solutions to larger businesses, developers, not-for-profits, municipalities, and financial institutions, and the support to deliver, fund, and manage such banking solutions. The Community, Consumer, and Business segment consists of lending and deposit solutions to individuals and small to mid-sized businesses. The Risk Management and Shared Services includes key shared corporate functions, parent company activity, and intersegment eliminations.

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.

Associated Banc-Corp has a Value Score of 92, which is considered to be undervalued.

When you look at Associated Banc-Corp’s price-to-sales ratio at 1.63 compared to the industry median at 2.03, this company has a lower price relative to revenue compared to its peers. This could make Associated Banc-Corp’s stock more attractive for value investors.

Associated Banc-Corp’s price-earnings ratio is 6.99 compared to the industry median at 8.05. This means it has a lower share price relative to earnings compared to its peers. This could make Associated Banc-Corp more attractive for value investors.

Now, let’s assess Associated Banc-Corp’s EV/EBITDA ratio, also known as enterprise multiple. At 3.8, when compared to the industry median of 5.1, the company may be considered undervalued 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. Associated Banc-Corp’s shareholder yield is higher than its industry median ratio of 4.11%. 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. Associated Banc-Corp’s price-to-book ratio is lower than its industry median ratio of 0.91. This could make Associated Banc-Corp more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Associated Banc-Corp’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Associated Banc-Corp’s price-to-free-cash-flow ratio is lower than its industry median ratio of 8.85. This could make Associated Banc-Corp more attractive because the lower P/FCF ratio indicates that Associated Banc-Corp 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.

BankUnited Inc’s Value Grade

Value Grade:

BankUnited, Inc. is a bank holding company of BankUnited (the Bank). The Bank provides a range of commercial lending and both commercial and consumer deposit services through banking centers located in Florida and the New York metropolitan area. It provides commercial lending and deposit services in the Southeast United States through its wholesale banking office in Atlanta, Georgia, and provides certain commercial lending and deposit products through national platforms and certain consumer deposit products through an online channel. The Bank?s lending and leasing products include commercial loans, commercial real estate loans, residential mortgages and other consumer loans. It offers traditional deposit products, including commercial and consumer checking accounts, money market deposit accounts, savings accounts and certificates of deposit with a variety of terms and rates, as well as a range of treasury, commercial payments and cash management services.

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.

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

BankUnited Inc’s price-earnings ratio is 7.2 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 BankUnited Inc more attractive for value investors.

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

You can read more about BankUnited 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 Community Corp (South Carolina)’s Value Grade

Value Grade:

First Community Corporation is a bank holding company, which operates through its First Community Bank (the Bank). The Company offers a range of traditional banking products and services for professionals and small-to medium-sized businesses, including consumer and commercial, mortgage, brokerage and investment, and insurance services. It also offers online banking to its customers. The Company is engaged in a commercial banking business with 22 full-service offices located in the Midlands of South Carolina, which includes Lexington County, Richland County, Newberry County and Kershaw County; the Upstate of South Carolina, which includes Greenville County, Anderson County and Pickens County; the Piedmont Region of South Carolina, which includes York County, South Carolina and the Central Savannah River Area, which includes Aiken County, South Carolina; and in Augusta, Georgia, which includes Richmond County and Columbia County.

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 Community Corp (South Carolina) has a Value Score of 72, which is considered to be undervalued.

First Community Corp (South Carolina)’s price-earnings ratio is 9.0 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 First Community Corp (South Carolina) less attractive for value investors.

First Community Corp (South Carolina)’s price-to-book ratio is lower than its peers. This could make First Community Corp (South Carolina) more attractive for value investors when compared to the industry median at 0.91.

You can read more about First Community Corp (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.

Lake Shore Bancorp, Inc.’s Value Grade

Value Grade:

Lake Shore Bancorp, Inc. operates as a mid-tier, federally chartered savings and loan holding company for Lake Shore Savings Bank (the Bank). The Bank consists of attracting retail deposits from the general public in the areas surrounding its branch offices and investing those deposits, together with funds generated from operations, primarily in commercial real estate loans, one-to four-family residential mortgage loans, home equity lines of credit and, to a lesser extent, commercial business loans, consumer loans, and investment securities. Its primary sources of funds for lending and investments are deposits, borrowings, receipts of principal and interest payments on loans and securities, proceeds from sales of loans or securities, and maturities and calls of investment securities. It has branches in Dunkirk, Fredonia, Jamestown, Westfield, Depew, East Amherst, Hamburg, Kenmore and Snyder. The Company operates through approximately 11 branches offices located in Western 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.

Lake Shore Bancorp, Inc. has a Value Score of 80, which is considered to be undervalued.

Lake Shore Bancorp, Inc.’s price-earnings ratio is 11.4 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 Lake Shore Bancorp, Inc. less attractive for value investors.

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

You can read more about Lake Shore 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.

New Peoples Bankshares Inc’s Value Grade

Value Grade:

New Peoples Bankshares, Inc. is a financial holding company. The Company?s business is conducted primarily through New Peoples Bank, Inc. (the Bank), a banking corporation. The Bank has a division doing business as New Peoples Financial Services, which offers investment services. The Bank offers a range of banking and related financial services focused primarily on serving individuals, small to medium size businesses and the professional community. It offers various banking services, including Commercial Loans, Residential Mortgage Loans, Construction Loans, Consumer Loans, Deposits, Investment Services and Other Bank Services. It offers a full range of short-medium- and longer-term commercial, 1-4 family residential mortgages and personal loans. Its commercial loans include both secured and unsecured loans for working capital, including inventory and receivables; business expansion, including acquisition of real estate and improvements; and purchase of equipment and machinery.

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.

New Peoples Bankshares Inc has a Value Score of 88, which is considered to be undervalued.

New Peoples Bankshares Inc’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 New Peoples Bankshares Inc more attractive for value investors.

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

You can read more about New Peoples 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.

Bank Ozk’s Value Grade

Value Grade:

Bank OZK (the Bank) is a regional bank that provides a range of financial solutions. The Bank offers a range of products, including checking, savings, loans, mortgages, treasury management, merchant services, trust and estate services, wealth, and credit cards, among others. Its savings products include certificate of deposits, money market accounts, and individual retirement accounts. Its personal lending options include home equity lines of credit, personal lines of credit and auto loans. It offers both a fixed rate mortgage and an adjustable-rate mortgage. Its online banking enables users to manage their accounts, pay bills, transfer funds, view electronic account statements and others. The Bank also provides individual consultation, financial planning, trust, and investment management services. The Bank conducts banking operations with over 240 offices in eight states, including Arkansas, Georgia, Florida, North Carolina, Texas, New York, California, and Mississippi.

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

Bank Ozk’s price-earnings ratio is 7.3 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 Bank Ozk more attractive for value investors.

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

You can read more about Bank Ozk’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.

• Associated Banc-Corp stock has a Value Grade of A.
• BankUnited Inc stock has a Value Grade of A.
• First Community Corp (South Carolina) stock has a Value Grade of B.
• Lake Shore Bancorp, Inc. stock has a Value Grade of B.
• New Peoples Bankshares Inc stock has a Value Grade of A.
• Bank Ozk stock has a Value Grade of A.

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 15
• Which Is a Better Investment, Bancolombia SA (ADR) or Woori Financial Group Inc (ADR) Stock?
• 5 Undervalued Banks Stocks for Thursday, September 14
• Why Arrow Financial Corporation’s (AROW) Stock Is Up 4.12%

AAII Disclaimer

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