Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 4 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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4 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 4 undervalued stocks in the Banks industry for Monday, October 16, 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.

Akbank T.A.S. (ADR)’s Value Grade

Value Grade:

Akbank TAS is a Turkey-based commercial bank. It operates under the following segments: Consumer Banking; Commercial Banking, Small and Medium Enterprises (SME) Banking, Corporate-Investment and Private Banking, and Treasury. Consumer Banking offers retail services such as deposit accounts, consumer loans and asset management services, among others. Corporate Banking, Commercial Banking and SME Banking provide solutions and services to large, medium and small size corporate and commercial customers, such as Term Loan (TL) and foreign currency (FC) denominated working capital loans financing for investments, foreign trade financing and cash management services, among others. Project finance loans are provided within the context of Investment Banking activities. In the scope of Private Banking, the Bank serves the members of the high-income customers. The Treasury segment conducts TL and FC spot and forward transactions, treasury bonds and private sector bond transactions, among 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.

Akbank T.A.S. (ADR) has a Value Score of 89, which is considered to be undervalued.

When you look at Akbank T.A.S. (ADR)’s price-to-sales ratio at 1.10 compared to the industry median at 1.92, this company has a lower price relative to revenue compared to its peers. This could make Akbank T.A.S. (ADR)’s stock more attractive for value investors.

Akbank T.A.S. (ADR)’s price-earnings ratio is 8.00 compared to the industry median at 7.65. This means it has a higher share price relative to earnings compared to its peers. This could make Akbank T.A.S. (ADR) less attractive for value investors.

Now, let’s assess Akbank T.A.S. (ADR)’s EV/EBITDA ratio, also known as enterprise multiple. At 1.1, when compared to the industry median of 5.0, 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. Akbank T.A.S. (ADR)’s shareholder yield is higher than its industry median ratio of 4.35%. 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. Akbank T.A.S. (ADR)’s price-to-book ratio is higher than its industry median ratio of 0.87. This could make Akbank T.A.S. (ADR) less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Akbank T.A.S. (ADR)’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Akbank T.A.S. (ADR)’s price-to-free-cash-flow ratio is higher than its industry median ratio of 8.40. This could make Akbank T.A.S. (ADR) less attractive because the higher P/FCF ratio indicates that Akbank T.A.S. (ADR) 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.

Bank of Nova Scotia’s Value Grade

Value Grade:

The Bank of Nova Scotia is a bank in the Americas. The Bank offers a range of advice, products and services, including personal and commercial banking, wealth management and private banking, corporate and investment banking, and capital markets. Its segments include Canadian Banking, International Banking, Global Wealth Management and Global Banking and Markets. The Canadian Banking segment provides a full suite of financial advice and banking solutions to retail, small business and commercial banking customers. The International Banking segment is a diverse franchise with Retail, Corporate, and Commercial customers. The Global Wealth Management segment is focused on delivering comprehensive wealth management advice and solutions to clients across its footprint. The Global Banking and Markets segment provides corporate clients with lending and transaction services, investment banking advice and access to capital markets.

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 of Nova Scotia has a Value Score of 86, which is considered to be undervalued.

Bank of Nova Scotia’s price-earnings ratio is 9.3 compared to the industry median at 7.7. This means that it has a higher price relative to its earnings compared to its peers. This makes Bank of Nova Scotia less attractive for value investors.

Bank of Nova Scotia’s price-to-book ratio is lower than its peers. This could make Bank of Nova Scotia more attractive for value investors when compared to the industry median at 0.87.

You can read more about Bank of Nova Scotia’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.

Coastal Carolina Bancshares, Inc.’s Value Grade

Value Grade:

Coastal Carolina Bancshares, Inc. is the bank holding company of Coastal Carolina National Bank (the Bank). The Bank is a nationally chartered commercial bank. The Bank is a locally operated financial institution focused on providing personalized service. The principal business activity of the Bank is to provide banking services to domestic markets, principally in Horry, Georgetown, Aiken, Richland, Greenville, Spartanburg, and Brunswick (NC) counties. The Bank offers a range of banking services designed to meet the specific needs of individuals and small and medium-sized businesses. The Bank’s loan portfolio consists of loans to individuals and businesses for various personal and commercial purposes primarily in its respective markets. The Bank’s loan portfolio includes construction and land development, real estate-residential, real estate-non-residential, commercial and industrial, and consumer and other. The Bank also has branches in Garden City, North Myrtle Beach, 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.

Coastal Carolina Bancshares, Inc. has a Value Score of 68, which is considered to be undervalued.

Coastal Carolina Bancshares, Inc.’s price-earnings ratio is 6.9 compared to the industry median at 7.7. This means that it has a lower price relative to its earnings compared to its peers. This makes Coastal Carolina Bancshares, Inc. more attractive for value investors.

Coastal Carolina Bancshares, Inc.’s price-to-book ratio is lower than its peers. This could make Coastal Carolina Bancshares, Inc. more attractive for value investors when compared to the industry median at 0.87.

You can read more about Coastal Carolina 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.

First Western Financial Inc’s Value Grade

Value Grade:

First Western Financial, Inc. is a financial holding company. The Company operates through its wholly owned subsidiaries, First Western Trust Bank (the Bank) and Ryder, Stilwell Inc. (RSI). Its segments include Wealth Management and Mortgage. The Wealth Management segment consists of operations relative to the Company's wealth management products and services, including deposit, loan, insurance, and trust and investment management advisory products and services. The Mortgage segment consists of operations relative to the Company's residential mortgage service offerings, including deposit, loan, insurance, and trust and investment management advisory products and services. The Company provides a range of wealth management services, including private banking, personal trust, investment management, mortgage loans, and institutional asset management services to individual and corporate clients, principally in Colorado, Arizona, California, Montana and Wyoming.

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

First Western Financial Inc’s price-earnings ratio is 9.9 compared to the industry median at 7.7. This means that it has a higher price relative to its earnings compared to its peers. This makes First Western Financial Inc less attractive for value investors.

First Western Financial Inc’s price-to-book ratio is higher than its peers. This could make First Western Financial Inc less attractive for value investors when compared to the industry median at 0.87.

You can read more about First Western Financial 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 4 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.

• Akbank T.A.S. (ADR) stock has a Value Grade of A.
• Bank of Nova Scotia stock has a Value Grade of A.
• Coastal Carolina Bancshares, Inc. stock has a Value Grade of B.
• First Western Financial Inc stock has a Value Grade of B.

Now that you have a bit more background about each of the 4 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.

• 4 Undervalued Banks Stocks for Monday, October 16
• 6 Undervalued Banks Stocks for Friday, October 13
• Why First Interstate Bancsystem Inc’s (FIBK) Stock Is Down 4.84%
• Why Horizon Bancorp Inc’s (HBNC) Stock Is Down 4.18%

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.