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 Monday, October 02, 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.

First Financial Bancorp’s Value Grade

Value Grade:

First Financial Bancorp. (First Financial) is a regional bank holding company. The Company is engaged in the business of commercial banking, other banking and banking-related activities through its subsidiary, First Financial Bank (the Bank). It provides a range of banking services to individuals and businesses, which includes commercial lending, real estate lending and consumer financing. The Company offers deposit products that include interest-bearing accounts, non-interest-bearing accounts, time deposit and cash management services for commercial customers. The Bank also provides a range of trust and wealth management services through its Wealth Management line of business. The Bank operates approximately 132 full-service banking centers in Ohio, Illinois, Indiana and Kentucky. The Bank also operates Commercial Finance division, which is responsible for its insurance lending business and franchise lending business, from a non-banking center location in Indiana.

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 Financial Bancorp has a Value Score of 76, which is considered to be undervalued.

When you look at First Financial Bancorp’s price-to-sales ratio at 2.37 compared to the industry median at 1.96, this company has a higher price relative to revenue compared to its peers. This could make First Financial Bancorp’s stock less attractive for value investors.

First Financial Bancorp’s price-earnings ratio is 7.13 compared to the industry median at 7.79. This means it has a lower share price relative to earnings compared to its peers. This could make First Financial Bancorp more attractive for value investors.

Now, let’s assess First Financial Bancorp’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. First Financial Bancorp’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. First Financial Bancorp’s price-to-book ratio is lower than its industry median ratio of 0.89. This could make First Financial Bancorp more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at First Financial Bancorp’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. First Financial Bancorp’s price-to-free-cash-flow ratio is higher than its industry median ratio of 8.66. This could make First Financial Bancorp less attractive because the higher P/FCF ratio indicates that First Financial Bancorp 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.

Home Bancorp, Inc.’s Value Grade

Value Grade:

Home Bancorp, Inc. is a bank holding company for Home Bank, N.A. (the Bank), a nationally chartered bank. The Bank conducts business through approximately 43 banking offices in the Acadiana, Baton Rouge, Greater New Orleans and Northshore (of Lake Pontchartrain) regions of south Louisiana, the Natchez region of west Mississippi and Houston region of Texas. The Bank is primarily engaged in attracting deposits from the public and using those funds to invest in loans and securities. Its principal sources of funds are customer deposits, repayments of loans, repayments of investments and funds borrowed from outside sources such as the Federal Home Loan Bank (FHLB) of Dallas. These funds are primarily used for the origination of loans, including one-to four-family first mortgage loans, home equity loans and lines, commercial real estate loans, construction and land loans, multi-family residential loans, commercial and industrial loans, and consumer 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.

Home Bancorp, Inc. has a Value Score of 93, which is considered to be undervalued.

Home Bancorp, Inc.’s price-earnings ratio is 6.1 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 Home Bancorp, Inc. more attractive for value investors.

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

You can read more about Home 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.

KeyCorp’s Value Grade

Value Grade:

KeyCorp is a bank-based financial services company, which operates through its subsidiary, KeyBank National Association (KeyBank). Through, KeyBank and certain other subsidiaries, it provides a range of retail and commercial banking, commercial leasing, investment management, consumer finance, student loan refinancing, commercial mortgage servicing and special servicing, and investment banking products and services to individual, corporate and institutional clients. The Company's Consumer Bank serves individuals and small businesses by offering a range of deposit and investment products, personal finance and financial wellness services, lending, mortgage, credit card and business advisory services, among others. Its Commercial Bank is an aggregation of its Institutional and Commercial operating segments. The Institutional operating segment delivers a suite of banking and capital markets products to its clients. The Commercial operating segment serves the needs of middle market 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.

KeyCorp has a Value Score of 89, which is considered to be undervalued.

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

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

You can read more about KeyCorp’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.

Luther Burbank Corp’s Value Grade

Value Grade:

Luther Burbank Corporation is a bank holding company. The Company operates primarily through its wholly owned subsidiary, Luther Burbank Savings. The Company's principal business is attracting deposits from the public and investing those funds in a variety of loans, including permanent mortgage loans and construction loans secured by residential, multifamily, and commercial real estate. The Company specializes in real estate secured lending in metropolitan areas in the western United States and has developed expertise in multifamily residential, jumbo nonconforming single family residential and commercial real estate lending. Its commercial real estate loans consist primarily of first mortgage loans made for the purpose of purchase, refinance or build-out of tenant improvements on investor-owned multifamily residential (five or more units) properties. Its full-service branches in California are located in Sonoma, Marin, Santa Clara, and Los Angeles Counties.

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.

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

Luther Burbank Corp’s price-earnings ratio is 7.8 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 Luther Burbank Corp fairly attractive for value investors.

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

You can read more about Luther Burbank 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.

Premier Financial Corp (OHIO)’s Value Grade

Value Grade:

Premier Financial Corp. is a bank holding company that conducts business through its wholly-owned subsidiaries, Premier Bank (the Bank). The Bank is primarily engaged in community banking. The Bank attracts deposits from the general public through its offices and website, and uses those and other available sources of funds to originate residential real estate loans, commercial real estate loans, commercial loans, home improvement and home equity loans and consumer loans. In addition, the Bank invests in United States Treasury and federal government agency obligations, obligations of states and political subdivisions, mortgage-backed securities that are issued by federal agencies, including real estate mortgage investment conduits (REMICs) and residential collateralized mortgage obligations (CMOs), and corporate bonds. The Bank conducts its operations through approximately 74 full-service banking center offices, 12 loan offices and two wealth offices.

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.

Premier Financial Corp (OHIO) has a Value Score of 95, which is considered to be undervalued.

Premier Financial Corp (OHIO)’s price-earnings ratio is 5.1 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 Premier Financial Corp (OHIO) more attractive for value investors.

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

You can read more about Premier Financial Corp (OHIO)’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.

Riverview Bancorp Inc’s Value Grade

Value Grade:

Riverview Bancorp, Inc. is the bank holding company of Riverview Bank (the Bank). The Company's business is conducted through the Bank. The Bank has two subsidiaries: Riverview Trust Company (the Trust Company) and Riverview Services, Inc. (Riverview Services). The Trust Company is a trust and financial services company that provides full-service brokerage activities, trust services, and asset management services. Riverview Services acts as a trustee for deeds of trust on mortgage loans granted by the Bank. The Company operates through two segments, which consist of banking operations performed by the Bank and trust and investment services performed by the Trust Company. The Company is engaged predominantly in the business of attracting deposits from the general public and using such funds in its primary market area to originate commercial business, commercial real estate, multi-family real estate, land, real estate construction, residential real estate, and other consumer 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.

Riverview Bancorp Inc has a Value Score of 84, which is considered to be undervalued.

Riverview Bancorp Inc’s price-earnings ratio is 7.3 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 Riverview Bancorp Inc more attractive for value investors.

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

You can read more about Riverview 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.

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.

• First Financial Bancorp stock has a Value Grade of B.
• Home Bancorp, Inc. stock has a Value Grade of A.
• KeyCorp stock has a Value Grade of A.
• Luther Burbank Corp stock has a Value Grade of A.
• Premier Financial Corp (OHIO) stock has a Value Grade of A.
• Riverview Bancorp Inc 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 Monday, October 02
• Small-Cap Value Is the Best Choice for Equity Diversification
• 6 Undervalued Banks Stocks for Friday, September 29
• Why Banco Macro SA (ADR)’s (BMA) Stock Is Down 5.24%

AAII Disclaimer

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