Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 7 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.

Click the button below to learn more about A+ Investor and subscribe today.

7 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 7 undervalued stocks in the Banks industry for Thursday, October 19, 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.

Byline Bancorp Inc’s Value Grade

Value Grade:

Byline Bancorp, Inc. is a bank holding company. The Company conducts all its business activities through its subsidiary, Byline Bank (the Bank), a full-service commercial bank, and Byline Bank?s subsidiaries. The Bank offers a range of banking products and services to small and medium-sized businesses, commercial real estate and financial sponsors and to consumers who generally live or work near its branches. It offers online account opening to consumer and business customers through its Website. It also provides trust and wealth management services to its customers. In addition to its traditional commercial banking business, the Bank provides small ticket equipment leasing solutions through Byline Financial Group (BFG), a wholly owned subsidiary of the Bank. It also supports its business customers with a range of deposit and treasury management products, along with business transaction accounts. It provides financing solutions for equipment vendors and their end users through BFG.

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.

Byline Bancorp Inc has a Value Score of 86, which is considered to be undervalued.

When you look at Byline Bancorp Inc’s price-to-sales ratio at 1.90 compared to the industry median at 1.92, this company has a lower price relative to revenue compared to its peers. This could make Byline Bancorp Inc’s stock more attractive for value investors.

Byline Bancorp Inc’s price-earnings ratio is 7.63 compared to the industry median at 7.67. This means it has a lower share price relative to earnings compared to its peers. This could make Byline Bancorp Inc more attractive for value investors.

Now, let’s assess Byline Bancorp Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 4.3, 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. Byline Bancorp Inc’s shareholder yield is lower than its industry median ratio of 4.33%. 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. Byline Bancorp Inc’s price-to-book ratio is higher than its industry median ratio of 0.87. This could make Byline Bancorp Inc less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Byline 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. Byline Bancorp Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 8.18. This could make Byline Bancorp Inc more attractive because the lower P/FCF ratio indicates that Byline 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.

Cadence Bank’s Value Grade

Value Grade:

Cadence Bank (the Bank) is a regional banking franchise with approximately 350 branch locations across the South and Texas. The Bank provides consumers, businesses, and corporations with a range of banking and financial solutions. The Bank's services and products include consumer banking, consumer loans, mortgages, home equity lines and loans, credit cards, commercial and business banking, treasury management, specialized lending, asset-based lending, commercial real estate, equipment financing, correspondent banking, small business administration (SBA) lending, foreign exchange, wealth management, investment and trust services, financial planning, retirement plan management, and personal and business insurance. The Bank offers baking solution in checking accounts, savings accounts, mortgages, investment management, credit cards, online and mobile banking, debit cards, treasury management, wealth management, trusts, business loans, business online banking, and merchant 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.

Cadence Bank has a Value Score of 87, which is considered to be undervalued.

Cadence Bank’s price-earnings ratio is 9.5 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 Cadence Bank less attractive for value investors.

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

You can read more about Cadence Bank’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.

Citizens Holding Company’s Value Grade

Value Grade:

Citizens Holding Company is a one-bank holding company of The Citizens Bank of Philadelphia (the Bank). It engages in commercial and personal banking activities, including accepting demand deposits, savings and time deposit accounts, making secured and unsecured loans, issuing letters of credit, originating mortgage loans, and providing personal and corporate trust services. The Bank has over 24 banking locations in 14 counties throughout the state of Mississippi. In addition to full service commercial banking, it offers mortgage loans, title insurance services through third party partnerships and a range of Internet banking services, including online banking, bill pay and cash management services for businesses. It also provides certain services that are closely related to commercial banking, such as credit life insurance and title insurance for its loan customers through third-party relationships. Internet services are available at the Bank website, www.thecitizensbankphila.com.

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.

Citizens Holding Company has a Value Score of 62, which is considered to be undervalued.

Citizens Holding Company’s price-earnings ratio is 8.8 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 Citizens Holding Company less attractive for value investors.

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

You can read more about Citizens Holding Company’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 Merchants Corp’s Value Grade

Value Grade:

First Merchants Corporation is a financial holding company. The Company operates banking operations through its wholly owned subsidiary, First Merchants Bank (the Bank). The Bank also operates First Merchants Private Wealth Advisors, which is a division of the Bank. The Bank includes approximately 122 banking locations in Indiana, Ohio, Michigan and Illinois. In addition to its branch network, the Company offers comprehensive electronic and mobile delivery channels to its customers. The Company operates through a community banking segment. Through the Bank, the Company offers a range of financial services, including accepting time, savings and demand deposits; making consumer, commercial, agri-business and real estate mortgage loans; providing personal and corporate trust services; offering full-service brokerage and private wealth management, and providing letters of credit, repurchase agreements, and other corporate 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.

First Merchants Corp has a Value Score of 87, which is considered to be undervalued.

First Merchants Corp’s price-earnings ratio is 6.5 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 First Merchants Corp more attractive for value investors.

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

You can read more about First Merchants 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.

QCR Holdings, Inc.’s Value Grade

Value Grade:

QCR Holdings, Inc. is a multi-bank holding company. The Company serves the Quad Cities, Cedar Rapids, Waterloo/Cedar Falls, Des Moines/Ankeny and Springfield communities through four wholly owned banking subsidiaries (Banks), Quad City Bank & Trust (QCBT), Cedar Rapids Bank & Trust (CRBT), Community State Bank (CSB) and Guaranty Bank (GB), which provides full-service commercial and consumer banking and trust and asset management services. The Company's principal business consists of attracting deposits and investing those deposits in loans/leases and securities. The Company engages in direct financing lease contracts and equipment financing agreements through m2 Equipment Finance, LLC (m2), a wholly owned subsidiary of QCBT. The Company also engages in wealth management services through its banking subsidiaries. The Company provides a range of commercial and retail lending/leasing and investment services to corporations, partnerships, individuals, and government agencies.

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.

QCR Holdings, Inc. has a Value Score of 82, which is considered to be undervalued.

QCR Holdings, Inc.’s price-earnings ratio is 7.3 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 QCR Holdings, Inc. more attractive for value investors.

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

You can read more about QCR Holdings, 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.

United Bancorp Inc’s Value Grade

Value Grade:

United Bancorp, Inc. is a bank holding company. The Company has one wholly owned subsidiary bank, Unified Bank, Martins Ferry, Ohio (the Bank). The Bank serves customers in northeastern, eastern, southeastern and south-central Ohio and the Northern panhandle of West Virginia and is engaged in the business of commercial and retail banking in Belmont, Harrison, Jefferson, Tuscarawas, Carroll, Athens, Hocking, and Fairfield counties and the surrounding localities. The bank also operates in Marshall County West Virginia. The Bank provides a range of banking and financial services, which includes accepting demand, savings and time deposits and granting commercial, real estate and consumer loans. The Bank's loan portfolio includes commercial loans, commercial real estate loans, residential real estate loans and installment loans. The Bank conducts its business through its main office and standalone operations center in Martins Ferry, Ohio and about 19 branches located in the 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.

United Bancorp Inc has a Value Score of 82, which is considered to be undervalued.

United Bancorp Inc’s price-earnings ratio is 6.7 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 United Bancorp Inc more attractive for value investors.

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

You can read more about United 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.

USCB Financial Holdings Inc’s Value Grade

Value Grade:

USCB Financial Holdings, Inc. is a bank holding company for U.S. Century Bank (the Bank). The Bank is a state-chartered, non-member financial institution, which provides financial services through its banking centers located in South Florida. The Bank operates approximately ten banking centers in South Florida providing a wide range of personal and business banking products and services. Its specialty banking offerings include small business administration (SBA) lending, yacht lending, homeowner association (HOA) services and global banking services. The Bank 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 suite of treasury, commercial payments and cash management services. Additionally, it offers deposit products for municipalities and other public entities.

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.

USCB Financial Holdings Inc has a Value Score of 69, which is considered to be undervalued.

USCB Financial Holdings Inc’s price-earnings ratio is 10.7 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 USCB Financial Holdings Inc less attractive for value investors.

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

You can read more about USCB Financial Holdings 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 7 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.

• Byline Bancorp Inc stock has a Value Grade of A.
• Cadence Bank stock has a Value Grade of A.
• Citizens Holding Company stock has a Value Grade of B.
• First Merchants Corp stock has a Value Grade of A.
• QCR Holdings, Inc. stock has a Value Grade of A.
• United Bancorp Inc stock has a Value Grade of A.
• USCB Financial Holdings Inc stock has a Value Grade of B.

Now that you have a bit more background about each of the 7 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.

• 7 Undervalued Banks Stocks for Thursday, October 19
• 4 Undervalued Banks Stocks for Wednesday, October 18
• Which Is a Better Investment, Banco Bilbao Vizcaya Argentaria SA (ADR) or Banco de Chile (ADR) Stock?
• Which Is a Better Investment, Banco Bilbao Vizcaya Argentaria SA (ADR) or KeyCorp Stock?

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.