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.

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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 Wednesday, October 25, 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.

BankFinancial Corp’s Value Grade

Value Grade:

BankFinancial Corporation is the bank holding company for BankFinancial, National Association (the Bank). The Bank is a full-service, national bank providing banking, wealth management and fiduciary services to individuals, families and businesses in the Chicago metropolitan area and on a regional or national basis for commercial finance, healthcare finance, equipment finance, commercial real estate finance and treasury management business customers. The Bank offers its customers a range of loan, deposit, trust and other financial products and services through approximately 20 full-service banking offices located in Cook, DuPage, Lake and Will Counties, Illinois, and through its Internet branch, www.bankfinancial.com. The Bank also offers a range of financial products and services that are related to loans and deposits, including cash management, funds transfers, bill payment and mobile banking transactions, trust services, wealth management, and general insurance agency 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.

BankFinancial Corp has a Value Score of 79, which is considered to be undervalued.

When you look at BankFinancial Corp’s price-to-sales ratio at 1.70 compared to the industry median at 1.87, this company has a lower price relative to revenue compared to its peers. This could make BankFinancial Corp’s stock more attractive for value investors.

BankFinancial Corp’s price-earnings ratio is 9.42 compared to the industry median at 7.55. This means it has a higher share price relative to earnings compared to its peers. This could make BankFinancial Corp less attractive for value investors.

Now, let’s assess BankFinancial Corp’s EV/EBITDA ratio, also known as enterprise multiple. At 5.8, when compared to the industry median of 5.2, 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. BankFinancial Corp’s shareholder yield is higher than its industry median ratio of 4.39%. 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. BankFinancial Corp’s price-to-book ratio is lower than its industry median ratio of 0.85. This could make BankFinancial Corp more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at BankFinancial Corp’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. BankFinancial Corp’s price-to-free-cash-flow ratio is higher than its industry median ratio of 7.81. This could make BankFinancial Corp less attractive because the higher P/FCF ratio indicates that BankFinancial Corp 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.

First Keystone Corp’s Value Grade

Value Grade:

First Keystone Corporation is a bank holding company. The Company operates, through its subsidiary, First Keystone Community Bank (the Bank), which is engaged in the business of commercial banking operation and trust department. The Bank is a full-service commercial bank providing a range of services to individuals and small to medium-sized businesses in its North-eastern Pennsylvania market area. The Bank's commercial banking activities include accepting time, demand, and savings deposits and making secured and unsecured commercial, real estate, agricultural, and consumer loans. The Bank also provides personal and corporate trust and agency services to individuals, corporations, and others, including trust investment accounts, investment advisory services, mutual funds, estate planning, and management of pension and profit-sharing plans. The area served by the Bank includes a mix of rural communities, small to mid-sized towns, and cities.

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 Keystone Corp has a Value Score of 79, which is considered to be undervalued.

First Keystone Corp’s price-earnings ratio is 10.3 compared to the industry median at 7.6. This means that it has a higher price relative to its earnings compared to its peers. This makes First Keystone Corp less attractive for value investors.

First Keystone Corp’s price-to-book ratio is lower than its peers. This could make First Keystone Corp fairly attractive for value investors when compared to the industry median at 0.85.

You can read more about First Keystone 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.

Midland States Bancorp Inc’s Value Grade

Value Grade:

Midland States Bancorp, Inc. is a diversified financial holding company. Its segments include Banking, Wealth Management, and Other. The Banking segment provides a range of financial products and services to consumers and businesses, including commercial, commercial real estate, mortgage and other consumer loan products; commercial equipment financing; mortgage loan sales and servicing; letters of credit; various types of deposit products, including checking, savings and time deposit accounts; merchant services; and corporate treasury management services. The Wealth Management segment operates under the name Midland Wealth Management, which consists of trust and wealth management products and services, including financial and estate planning, trustee and custodial services, investment management, tax and insurance planning, business planning, corporate retirement plan consulting and administration and retail brokerage services through a nationally recognized third party broker dealer.

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.

Midland States Bancorp Inc has a Value Score of 97, which is considered to be undervalued.

Midland States Bancorp Inc’s price-earnings ratio is 5.0 compared to the industry median at 7.6. This means that it has a lower price relative to its earnings compared to its peers. This makes Midland States Bancorp Inc more attractive for value investors.

Midland States Bancorp Inc’s price-to-book ratio is higher than its peers. This could make Midland States Bancorp Inc less attractive for value investors when compared to the industry median at 0.85.

You can read more about Midland States 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.

Peapack-Gladstone Financial Corp’s Value Grade

Value Grade:

Peapack-Gladstone Financial Corporation is a bank holding company. The Company?s principal subsidiary is Peapack-Gladstone Bank (the Bank), which is a state chartered commercial bank. Its segments include Banking and Peapack Private. Its Banking segment includes commercial (includes corporate and industrial (C&I;) and equipment financing), commercial real estate, multifamily, residential and consumer lending activities; treasury management services; C&I; advisory services; escrow management; deposit generation; operation of ATMs; telephone and Internet banking services; merchant credit card services and customer support sales. Its Peapack Private segment includes investment management services for individuals and institutions; personal trust services, including services as executor, trustee, administrator, custodian; and other financial planning and advisory services. This segment also includes the activity of the Delaware subsidiary, PGB Trust and Investments of Delaware.

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.

Peapack-Gladstone Financial Corp has a Value Score of 90, which is considered to be undervalued.

Peapack-Gladstone Financial Corp’s price-earnings ratio is 6.1 compared to the industry median at 7.6. This means that it has a lower price relative to its earnings compared to its peers. This makes Peapack-Gladstone Financial Corp more attractive for value investors.

Peapack-Gladstone Financial Corp’s price-to-book ratio is lower than its peers. This could make Peapack-Gladstone Financial Corp fairly attractive for value investors when compared to the industry median at 0.85.

You can read more about Peapack-Gladstone 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.

Provident Financial Holdings, Inc.’s Value Grade

Value Grade:

Provident Financial Holdings, Inc. is a holding company of Provident Savings Bank, F.S.B. (the Bank). The Bank is a federally chartered stock savings bank. The Bank is a financial services company serving consumers and small to mid-sized businesses in the Inland Empire region of Southern California. The Bank conducts its business operations as Provident Bank, and through its subsidiary, Provident Financial Corp (PFC). The business activities of the Bank consist of community banking, investment services and trustee services for real estate transactions. The Bank’s community banking operations primarily consist of accepting deposits from customers within the communities surrounding its full-service offices and investing those funds in single-family, multi-family, commercial real estate, construction and other mortgage loans. The Bank conducts trustee services for its real estate transactions through PFC. It operates approximately 12 full-service banking offices in Riverside County.

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.

Provident Financial Holdings, Inc. has a Value Score of 90, which is considered to be undervalued.

Provident Financial Holdings, Inc.’s price-earnings ratio is 10.3 compared to the industry median at 7.6. This means that it has a higher price relative to its earnings compared to its peers. This makes Provident Financial Holdings, Inc. less attractive for value investors.

Provident Financial Holdings, Inc.’s price-to-book ratio is higher than its peers. This could make Provident Financial Holdings, Inc. less attractive for value investors when compared to the industry median at 0.85.

You can read more about Provident 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.

Westbury Bancorp Inc’s Value Grade

Value Grade:

Westbury Bancorp, Inc. is the holding company for Westbury Bank (the Bank). The Bank is an independent community bank serving communities in Washington and Waukesha Counties through its eight banking offices providing deposit and loan services to individuals, professionals, and businesses throughout its markets. The Bank provides checking, savings, certificates of deposit, consumer loans, credit cards, individual retirement accounts, and others. The Bank’s services include online banking, mobile banking, bill pay, Pop Money, order checks, and e-statements, among others. The Bank’s business services include business checking and treasury management. The Bank’s commercial loans category includes commercial real estate, lines of credit, equipment, construction, working capital, acquisitions, letters of credit, and SBAs. The Bank offers an array of home loan options, including purchase, refinance, construction, Federal VA, WHEDA, and home equity loans and lines of credit.

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.

Westbury Bancorp Inc has a Value Score of 85, which is considered to be undervalued.

Westbury Bancorp Inc’s price-earnings ratio is 6.5 compared to the industry median at 7.6. This means that it has a lower price relative to its earnings compared to its peers. This makes Westbury Bancorp Inc more attractive for value investors.

Westbury Bancorp Inc’s price-to-book ratio is lower than its peers. This could make Westbury Bancorp Inc more attractive for value investors when compared to the industry median at 0.85.

You can read more about Westbury 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.

WesBanco Inc’s Value Grade

Value Grade:

Wesbanco, Inc. is a bank holding company of Wesbanco Bank, Inc. (the Bank). The Company offers a range of financial services, including retail banking, corporate banking, personal and corporate trust services, brokerage services, mortgage banking and insurance. It offers its services through two segments: Community Banking and Trust and Investment Services. Its Community Banking segment offers services traditionally offered by full-service commercial banks, including commercial demand, individual demand and time deposit accounts, as well as commercial, mortgage and individual installment loans, and certain non-traditional offerings, such as insurance and securities brokerage services. The Trust and Investment Services segment offers trust services, as well as various alternative investment products, including mutual funds. The Bank operates approximately 194 branches and 188 ATM machines in West Virginia, Ohio, western Pennsylvania, Kentucky, southern Indiana and Maryland.

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.

WesBanco Inc has a Value Score of 77, which is considered to be undervalued.

WesBanco Inc’s price-earnings ratio is 7.7 compared to the industry median at 7.6. This means that it has a higher price relative to its earnings compared to its peers. This makes WesBanco Inc less attractive for value investors.

WesBanco Inc’s price-to-book ratio is higher than its peers. This could make WesBanco Inc less attractive for value investors when compared to the industry median at 0.85.

You can read more about WesBanco 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.

• BankFinancial Corp stock has a Value Grade of B.
• First Keystone Corp stock has a Value Grade of B.
• Midland States Bancorp Inc stock has a Value Grade of A.
• Peapack-Gladstone Financial Corp stock has a Value Grade of A.
• Provident Financial Holdings, Inc. stock has a Value Grade of A.
• Westbury Bancorp Inc stock has a Value Grade of A.
• WesBanco 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 Wednesday, October 25
• 5 Undervalued Banks Stocks for Tuesday, October 24
• Why Bank of Marin Bancorp’s (BMRC) Stock Is Down 4.17%
• Why Cadence Bank’s (CADE) Stock Is Up 5.23%

AAII Disclaimer

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