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 29, 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 89, which is considered to be undervalued.

When you look at Berkshire Hills Bancorp Inc’s price-to-sales ratio at 1.72 compared to the industry median at 1.96, 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 8.72 compared to the industry median at 7.78. 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 5.0, 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. Berkshire Hills Bancorp Inc’s shareholder yield is higher than its industry median ratio of 4.29%. 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 higher than its industry median ratio of 0.89. This could make Berkshire Hills Bancorp Inc fairly 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 8.57. 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.

Chino Commercial Bancorp (CA)’s Value Grade

Value Grade:

Chino Commercial Bancorp serves as the holding company for Chino Commercial Bank (The Bank), which is a nationally chartered bank. The Bank offers personal banking and business banking services. The Bank's personal banking services, such as personal checking and savings, individual retirement account, online banking, mobile banking, Cash on delivery, debit cards, direct deposit, e-statements, electronic tax payment services, night depository, notary services and savings bonds. Its business banking offers business checking and savings, business loans, online cash management, business mobile banking, remote deposit capture, merchant services and medical professionals. Its Commercial loan products include lines of credit, letters of credit, term loans and equipment loans, commercial real estate loans, accounts receivable financing, factoring, equipment leasing and other working capital financing. Its Financing products include home improvement lines of credit and MasterCard debit cards.

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.

Chino Commercial Bancorp (CA) has a Value Score of 69, which is considered to be undervalued.

Chino Commercial Bancorp (CA)’s price-earnings ratio is 7.0 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 Chino Commercial Bancorp (CA) more attractive for value investors.

Chino Commercial Bancorp (CA)’s price-to-book ratio is lower than its peers. This could make Chino Commercial Bancorp (CA) more attractive for value investors when compared to the industry median at 0.89.

You can read more about Chino Commercial Bancorp (CA)’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.

Dime Community Bancshares Inc’s Value Grade

Value Grade:

Dime Community Bancshares, Inc. is a bank holding company. The Company is engaged in providing commercial banking and financial services through its wholly owned subsidiary, Dime Community Bank (the Bank). It is engaged in providing full-service commercial and consumer banking services, including accepting time, savings and demand deposits from the businesses, consumers, and local municipalities. It also offers the Certificate of Deposit Account Registry Service (CDARS) and Insured Cash Sweep (ICS) programs. In addition, it offers merchant credit and debit card processing, automated teller machines, cash management services, lockbox processing, online banking services, remote deposit capture, safe deposit boxes, and individual retirement accounts as well as investment services through Dime Financial Services LLC. Through its title insurance subsidiary, the Bank acts as a broker for title insurance services. It operates 59 branch locations throughout Long Island and the New York City.

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.

Dime Community Bancshares Inc has a Value Score of 97, which is considered to be undervalued.

Dime Community Bancshares Inc’s price-earnings ratio is 5.6 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 Dime Community Bancshares Inc more attractive for value investors.

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

You can read more about Dime Community 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.

Oregon Pacific Bancorp’s Value Grade

Value Grade:

Oregon Pacific Bancorp is a bank holding company. The Company, through its subsidiary, Oregon Pacific Banking Company, doing business as Oregon Pacific Bank (the Bank), is engaged in providing banking products and services from its full-service branches in Florence, Eugene, Coos Bay, Roseburg, and Medford and a loan production office in Portland. The Bank also offers trust services in Florence, Coos Bay, Medford, and Eugene. The Bank specializes in offering comprehensive financial services to local families and business owners, which includes checking, savings, money market, and time deposit accounts. The Bank also offers a variety of lending services, including commercial, consumer, and credit cards. Its merchant services department handles payment processing solutions for business clients. Its technology services include Internet banking, online bill pay, and mobile banking services. It also provides wealth management and investment services that offer non-deposit products.

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.

Oregon Pacific Bancorp has a Value Score of 73, which is considered to be undervalued.

Oregon Pacific Bancorp’s price-earnings ratio is 5.6 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 Oregon Pacific Bancorp more attractive for value investors.

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

You can read more about Oregon Pacific 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.

West Coast Community Bancorp’s Value Grade

Value Grade:

West Coast Community Bancorp is the Holding Company for Santa Cruz County Bank (the Bank), its wholly owned subsidiary. The Bank is an SBA lender in Santa Cruz County and Silicon Valley and a USDA lender in the state of California. As a full-service bank, Santa Cruz County Bank offers competitive deposit and lending solutions for businesses and individuals, including business loans, lines of credit, commercial real estate financing, construction lending, agricultural loans, SBA and USDA government guaranteed loans, asset-based lending, credit cards, merchant services, remote deposit capture, mobile and online banking, bill payment and treasury management. Its personal banking products include checking accounts, savings and certificates of deposits (CDs), individual retirement accounts (IRAs), health savings accounts and additional services. The Bank has branches in Aptos, Capitola, Cupertino, Monterey, Salinas, Santa Cruz, Scotts Valley, and Watsonville.

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.

West Coast Community Bancorp has a Value Score of 76, which is considered to be undervalued.

West Coast Community Bancorp’s price-earnings ratio is 6.0 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 West Coast Community Bancorp more attractive for value investors.

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

You can read more about West Coast Community 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.

VersaBank’s Value Grade

Value Grade:

VersaBank is a Canada-based chartered bank. The Bank provides commercial lending and banking services in Canada and the United States, as well as cybersecurity services and banking and financial technology development services through the operations of its wholly owned subsidiary DRT Cyber Inc. (DRTC). It operates through two segments: Digital Banking and DRTC (cybersecurity services). Digital Banking segment obtains its deposits and provides its loans and leases electronically via deposit and lending solutions for financial intermediaries. DRTC segment develops solutions to address the volume of cyber threats challenging financial institutions, multi-national corporations and government entities. Its loan portfolio includes point-of-sale loans and leases, commercial real estate mortgages, commercial real estate loans and public sector and other financing. It also offers tax-free savings accounts, guaranteed investment certificates, and registered retirement savings plans.

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.

VersaBank has a Value Score of 94, which is considered to be undervalued.

VersaBank’s price-earnings ratio is 5.9 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 VersaBank more attractive for value investors.

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

You can read more about VersaBank’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.

• Berkshire Hills Bancorp Inc stock has a Value Grade of A.
• Chino Commercial Bancorp (CA) stock has a Value Grade of B.
• Dime Community Bancshares Inc stock has a Value Grade of A.
• Oregon Pacific Bancorp stock has a Value Grade of B.
• West Coast Community Bancorp stock has a Value Grade of B.
• VersaBank 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.

• Small-Cap Value Is the Best Choice for Equity Diversification
• 6 Undervalued Banks Stocks for Friday, September 29
• 3 Undervalued Banks Stocks for Thursday, September 28
• Is Southern California Bancorp (BCAL) Stock a Good Investment?

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.