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 30, 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.

Banner Corp’s Value Grade

Value Grade:

Banner Corporation is a bank holding company for Banner Bank (the Bank). The Bank is a chartered commercial bank in the State of Washington. The Bank is a regional bank that offers a variety of commercial banking services and financial products to individuals, businesses and public sector entities in its primary market areas. The Banks primary business is that of traditional banking institutions, accepting deposits and originating loans in locations surrounding its offices in Washington, Oregon, California and Idaho. The Bank is also a participant in secondary loan markets, engaging in mortgage banking operations, through the origination and sale of one- to four-family and multifamily residential loans. Its lending activities include commercial business and commercial real estate loans, agriculture business loans, construction and land development loans, one- to four-family and multifamily residential loans, United States small business administration (SBA) 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.

Banner Corp has a Value Score of 81, which is considered to be undervalued.

When you look at Banner Corp’s price-to-sales ratio at 2.10 compared to the industry median at 1.81, this company has a higher price relative to revenue compared to its peers. This could make Banner Corp’s stock less attractive for value investors.

Banner Corp’s price-earnings ratio is 7.37 compared to the industry median at 7.65. This means it has a lower share price relative to earnings compared to its peers. This could make Banner Corp more attractive for value investors.

Now, let’s assess Banner Corp’s EV/EBITDA ratio, also known as enterprise multiple. At 5.2, when compared to the industry median of 5.6, 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. Banner Corp’s shareholder yield is higher than its industry median ratio of 4.32%. 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. Banner Corp’s price-to-book ratio is higher than its industry median ratio of 0.85. This could make Banner Corp less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Banner Corp’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Banner Corp’s price-to-free-cash-flow ratio is higher than its industry median ratio of 7.60. This could make Banner Corp less attractive because the higher P/FCF ratio indicates that Banner 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.

Sierra Bancorp’s Value Grade

Value Grade:

Sierra Bancorp is a bank holding company for Bank of the Sierra (the Bank). The Bank is a California state-chartered bank, which offers a range of retail and commercial banking services via branch offices located throughout California?s South San Joaquin Valley, the Central Coast, Ventura County, and neighboring communities. It provides an Internet branch which provides the ability to open deposit accounts online; an online banking option with bill-pay and mobile banking capabilities; online lending solutions for consumers and small businesses; a customer service center, and an automated telephone banking system. Its lending activities cover real estate, commercial (including small businesses), mortgage warehouse, agricultural, and consumer loans. In addition to loans, it offers a range of deposit products and services for individuals and businesses, including checking accounts, savings accounts, money market demand accounts, time deposits, retirement accounts, and sweep accounts.

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.

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

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

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

You can read more about Sierra 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.

Croghan Bancshares, Inc.’s Value Grade

Value Grade:

Croghan Bancshares, Inc. is the holding company of The Croghan Colonial Bank (the Bank). The Bank offers various services, such as personal banking, business banking and lending services. Its personal banking services include deposit accounts, savings options, digital services and credit & debit cards. It offers Gen$pend, E-Z Checking, classic checking, interest checking and overdraft protection. Its business banking services include business online banking, business mobile banking, business bill pay, merchant services, remote deposit capture, business Croghan alerts, business e-statements, business mobile deposit, business debit, credit cards and others. Its lending services include personal lending, business lending and mortgage lending. It offers a diverse range of commercial and retail banking services through its 19 banking centers located in Bellevue, Clyde, Curtice, Fremont, Green Springs, Monroeville, Norwalk, Maumee, Milan, Oak Harbor, Oregon, Port Clinton, and Tiffin, Ohio.

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.

Croghan Bancshares, Inc. has a Value Score of 78, which is considered to be undervalued.

Croghan Bancshares, Inc.’s price-earnings ratio is 8.0 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 Croghan Bancshares, Inc. less attractive for value investors.

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

You can read more about Croghan 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.

Comerica Incorporated’s Value Grade

Value Grade:

Comerica Incorporated is a financial holding company. Its Commercial Bank segment serves small and middle market businesses, multinational corporations, and governmental entities by offering various products and services, including commercial loans and lines of credit, deposits, cash management, capital market products, international trade finance, letters of credit, foreign exchange management services and loan syndication services. Retail Bank segment includes a range of personal financial services, consisting of consumer lending, consumer deposit gathering and mortgage loan origination. The segment also offers a subset of commercial products and services to micro-businesses. Wealth Management segment offers products and services consisting of fiduciary services, private banking, retirement services, investment management and advisory services, investment banking and brokerage services. Finance segment includes the securities portfolio and asset and liability management activities.

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.

Comerica Incorporated has a Value Score of 95, which is considered to be undervalued.

Comerica Incorporated’s price-earnings ratio is 4.3 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 Comerica Incorporated more attractive for value investors.

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

You can read more about Comerica Incorporated’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 4.7 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 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 0.85.

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.

Mizuho Financial Group Inc (ADR)’s Value Grade

Value Grade:

Mizuho Financial Group Inc is a Japan-based bank holding company mainly engaged in the business of bank holding companies, banks, securities specialist companies and other companies. The Company operates through five business segments. The Retail and Corporate Company segment operates for domestic individuals, small and medium enterprises and mid-sized customers. The Large Corporate, Financial and Public Corporation Company segment operates for clients of large corporate corporations, financial corporations and public corporations in Japan. The Global Corporate Company segment operates for clients of overseas-affiliated Japanese companies and non-Japanese companies. The Global Markets Company segment is engaged in investment business in interest rates, equity, among others. The Asset Management Company segment is engaged in the development and provision of products that meet the asset management needs of clients from individuals to institutional investors.

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.

Mizuho Financial Group Inc (ADR) has a Value Score of 72, which is considered to be undervalued.

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

You can read more about Mizuho Financial Group Inc (ADR)’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.

• Banner Corp stock has a Value Grade of A.
• Sierra Bancorp stock has a Value Grade of A.
• Croghan Bancshares, Inc. stock has a Value Grade of B.
• Comerica Incorporated stock has a Value Grade of A.
• Dime Community Bancshares Inc stock has a Value Grade of A.
• Mizuho Financial Group Inc (ADR) stock has a Value Grade of B.

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 30
• 4 Undervalued Banks Stocks for Friday, October 27
• Why Amalgamated Bank’s (AMAL) Stock Is Up 8.29%
• Why Axos Financial Inc’s (AX) Stock Is Down 7.88%

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.