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 22, 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.

AmeriServ Financial, Inc.’s Value Grade

Value Grade:

AmeriServ Financial, Inc. is a bank holding company of AmeriServ Financial Bank (the Bank). The Bank provides a range of services, including retail banking services and lending, depository, and related financial services. Its retail banking services include demand, savings, and time deposits, checking accounts, money market accounts, secured and unsecured consumer loans, mortgage loans, safe deposit boxes, holiday club accounts, and money order. It provides lending, depository, and related financial services to commercial, industrial, financial, and governmental customers, such as commercial real estate mortgage loans (CRE), short and medium-term loans, revolving credit arrangements, lines of credit, inventory and accounts receivable financing, real estate construction loans, business savings accounts, certificates of deposit, wire transfers, night depository, and lock box services. It also operates 18 automated bank teller machines (ATMs) through its 24-hour banking network.

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.

AmeriServ Financial, Inc. has a Value Score of 86, which is considered to be undervalued.

When you look at AmeriServ Financial, Inc.’s price-to-sales ratio at 0.82 compared to the industry median at 1.98, this company has a lower price relative to revenue compared to its peers. This could make AmeriServ Financial, Inc.’s stock more attractive for value investors.

AmeriServ Financial, Inc.’s price-earnings ratio is 10.54 compared to the industry median at 7.81. This means it has a higher share price relative to earnings compared to its peers. This could make AmeriServ Financial, Inc. less attractive for value investors.

Now, let’s assess AmeriServ Financial, Inc.’s EV/EBITDA ratio, also known as enterprise multiple. At 5.8, 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. AmeriServ Financial, Inc.’s shareholder yield is the same than its industry median ratio of 4.24%. 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. AmeriServ Financial, Inc.’s price-to-book ratio is lower than its industry median ratio of 0.89. This could make AmeriServ Financial, Inc. more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at AmeriServ Financial, Inc.’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. AmeriServ Financial, Inc.’s price-to-free-cash-flow ratio is higher than its industry median ratio of 8.64. This could make AmeriServ Financial, Inc. less attractive because the higher P/FCF ratio indicates that AmeriServ Financial, 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.

Customers Bancorp Inc’s Value Grade

Value Grade:

Customers Bancorp, Inc. is a bank holding company. It is engaged in banking activities through its subsidiary, Customers Bank (the Bank). The Bank serves residents and businesses in Southeastern Pennsylvania, New York, New Jersey, New York City, New England and other geographies, multifamily lending, small business administration lending and residential mortgage lending. The Bank has seven full-service branches and provides commercial banking products, primarily loans and deposits. The Bank administratively supports loans and other financial products, including equipment finance leases, to customers. It also offers venture banking loan portfolios. The Bank serves specialty niche businesses nationwide, including its commercial loans to mortgage companies, commercial equipment financing, SBA lending, specialty lending and consumer loans through relationships with fintech companies. Its Specialty Banking includes lending to mortgage companies, equipment finance, and warehouse lending.

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.

Customers Bancorp Inc has a Value Score of 96, which is considered to be undervalued.

Customers Bancorp Inc’s price-earnings ratio is 5.8 compared to the industry median at 7.8. This means that it has a lower price relative to its earnings compared to its peers. This makes Customers Bancorp Inc more attractive for value investors.

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

You can read more about Customers 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.

ENB Financial Corp’s Value Grade

Value Grade:

ENB Financial Corp is a bank holding company. Its wholly owned subsidiary, Ephrata National Bank (the Bank), is a full-service commercial bank. The Company provides a range of financial services to individuals and small-to-medium-sized businesses in the Market Area. The Company offers a range of demand accounts, in addition to savings and time deposits. The Company also offers secured and unsecured commercial, real estate, and consumer loans. Its ancillary services include direct deposit and direct payments of funds through Electronic Funds Transfer, automatic teller machine linked to the Star network, telephone banking, MasterCard debit cards, Visa or MasterCard credit cards, and safe deposit box facilities. It offers internet banking, including bill pay and wire transfer capabilities, remote deposit capture, and an ENB Bank on the Go! app for iPhones or Android phones. It also offers a full complement of trust and investment advisory services through ENB?s Wealth Solutions.

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.

ENB Financial Corp has a Value Score of 97, which is considered to be undervalued.

ENB Financial Corp’s price-earnings ratio is 5.5 compared to the industry median at 7.8. This means that it has a lower price relative to its earnings compared to its peers. This makes ENB Financial Corp more attractive for value investors.

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

You can read more about ENB 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.

Pioneer Bankshares Inc.’s Value Grade

Value Grade:

Pioneer Bankshares, Inc. is the one-bank holding company of Pioneer Bank, Inc. (the Bank). The Bank is engaged in the general commercial banking business, primarily serving the counties of Page, Greene, Rockingham, and Albemarle, Virginia. The Bank offers a full range of banking and related financial services focused primarily towards serving individual consumers, small to medium size commercial businesses, and the professional community. The Bank provides individual consumers, professionals and small and medium-sized commercial businesses in its market area with responsive and technologically advanced banking services. The Bank operates a small finance company known as Valley Finance Services, a Division of Pioneer Bank, which specializes in consumer and dealer auto lending. The Bank strives to serve the banking needs of its customers while developing personal, hometown relationships. The Bank also operates a small Business Banking Center in Harrisonburg, VA.

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.

Pioneer Bankshares Inc. has a Value Score of 86, which is considered to be undervalued.

Pioneer Bankshares Inc.’s price-earnings ratio is 10.0 compared to the industry median at 7.8. This means that it has a higher price relative to its earnings compared to its peers. This makes Pioneer Bankshares Inc. less attractive for value investors.

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

You can read more about Pioneer 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.

QNB Corp’s Value Grade

Value Grade:

QNB Corp. is a bank holding company. The Company conducts its business through its wholly owned subsidiary, QNB Bank (the Bank). The Bank is engaged in the general commercial banking business and provides a full range of banking services to its customers. These banking services consist of attracting deposits and using these funds in making commercial loans, residential mortgage loans, consumer loans, and purchasing investment securities. The Bank?s deposits are in the form of time, demand and savings accounts. The Banks? time deposits include certificates of deposit and individual retirement accounts. The Bank?s demand and savings accounts include money market accounts, interest-bearing demand accounts, including checking accounts, club accounts, traditional statement savings accounts, and an online savings account. The Bank operates approximately 12 full-service community banking offices in Bucks, Montgomery and Lehigh counties in southeastern Pennsylvania.

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.

QNB Corp has a Value Score of 91, which is considered to be undervalued.

QNB Corp’s price-earnings ratio is 5.8 compared to the industry median at 7.8. This means that it has a lower price relative to its earnings compared to its peers. This makes QNB Corp more attractive for value investors.

QNB Corp’s price-to-book ratio is lower than its peers. This could make QNB Corp more attractive for value investors when compared to the industry median at 0.89.

You can read more about QNB 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.

Simmons First National Corp’s Value Grade

Value Grade:

Simmons First National Corporation is a financial holding company. The Company, through its lead subsidiary, Simmons Bank (the Bank), provides banking and other financial products and services in markets located in Arkansas, Kansas, Missouri, Oklahoma, Tennessee and Texas. The Bank offers commercial banking products and services to business and other corporate customers. The Bank extends loans for a range of corporate purposes, including financing commercial real estate, construction of properties, commercial and industrial uses, acquisition and equipment financing, and other general corporate needs. The Bank also engages in small business administration and agricultural finance lending, and it offers corporate credit card products, as well as corporate deposit products and treasury management services. The Bank also offers a range of consumer banking products and services, including savings, time, and checking deposit products, automated teller machines services (ATM), 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.

Simmons First National Corp has a Value Score of 84, which is considered to be undervalued.

Simmons First National Corp’s price-earnings ratio is 7.9 compared to the industry median at 7.8. This means that it has a higher price relative to its earnings compared to its peers. This makes Simmons First National Corp less attractive for value investors.

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

You can read more about Simmons First National 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.

• AmeriServ Financial, Inc. stock has a Value Grade of A.
• Customers Bancorp Inc stock has a Value Grade of A.
• ENB Financial Corp stock has a Value Grade of A.
• Pioneer Bankshares Inc. stock has a Value Grade of A.
• QNB Corp stock has a Value Grade of A.
• Simmons First National Corp 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 22
• 7 Undervalued Banks Stocks for Thursday, September 21
• Which Is a Better Investment, Grupo Aval Acciones y Valores SA - ADR or Grupo Financiero Galicia S.A. (ADR) Stock?
• Why Bancolombia SA (ADR)’s (CIB) Stock Is Down 4.52%

AAII Disclaimer

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