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 Thursday, November 09, 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.

Arrow Financial Corporation’s Value Grade

Value Grade:

Arrow Financial Corporation is a bank holding company. The banking subsidiaries are Glens Falls National Bank and Trust Company (GFNB), and Saratoga National Bank and Trust Company (SNB). The Company provides a broad range of banking and insurance services across northeastern New York, including online and mobile banking, wealth management, money market and deposit accounts, and mortgage, consumer and commercial loans. Its loan portfolio consists of Commercial, Commercial Real Estate, Consumer Loans, and Residential. It offers a variety of loan options to meet the specific needs of its commercial customers including term loans, time notes and lines of credit. It offers commercial real estate loans to finance real estate purchases, refinancings, expansions and improvements to commercial properties. Its consumer loans primarily comprised automobile loans. It finances the purchases of automobiles indirectly through dealer relationships located throughout upstate New York and Vermont.

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.

Arrow Financial Corporation has a Value Score of 64, which is considered to be undervalued.

When you look at Arrow Financial Corporation’s price-to-sales ratio at 2.60 compared to the industry median at 1.87, this company has a higher price relative to revenue compared to its peers. This could make Arrow Financial Corporation’s stock less attractive for value investors.

Arrow Financial Corporation’s price-earnings ratio is 11.65 compared to the industry median at 8.03. This means it has a higher share price relative to earnings compared to its peers. This could make Arrow Financial Corporation less attractive for value investors.

Now, let’s assess Arrow Financial Corporation’s EV/EBITDA ratio, also known as enterprise multiple. At 5.9, when compared to the industry median of 5.5, 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. Arrow Financial Corporation’s shareholder yield is higher than its industry median ratio of 4.18%. 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. Arrow Financial Corporation’s price-to-book ratio is higher than its industry median ratio of 0.90. This could make Arrow Financial Corporation less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Arrow Financial Corporation’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Arrow Financial Corporation’s price-to-free-cash-flow ratio is higher than its industry median ratio of 8.73. This could make Arrow Financial Corporation less attractive because the higher P/FCF ratio indicates that Arrow Financial Corporation 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.

Bankinter SA - ADR’s Value Grade

Value Grade:

Bankinter SA is a Spain-based financial institution (the Bank) primarily engaged in the banking sector. The Bank's activities are divided into four business segments: Commercial banking, which offers current accounts, fixed-term deposits, investment management and advisory, as well as mortgage loans, among others, to individual customers; Corporate banking, which provides financial services to small and medium-sized companies, corporations and government bodies; Consumer finance, which focuses on personal loans and credit card services through Bankinter Consumer Finance EFC, and Other, which includes online savings accounts, among others. The Company operates through numerous subsidiaries, such as Bankinter Gestion de Activos SGIIC, Hispamarket SA, Bankinter Capital Riesgo SGECR SA and Bankinter Sociedad de Financiacion SAU.

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.

Bankinter SA - ADR has a Value Score of 82, which is considered to be undervalued.

Bankinter SA - ADR’s price-earnings ratio is 7.0 compared to the industry median at 8.0. This means that it has a lower price relative to its earnings compared to its peers. This makes Bankinter SA - ADR more attractive for value investors.

Bankinter SA - ADR’s price-to-book ratio is lower than its peers. This could make Bankinter SA - ADR more attractive for value investors when compared to the industry median at 0.90.

You can read more about Bankinter SA - 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.

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 69, which is considered to be undervalued.

Coastal Carolina Bancshares, Inc.’s price-earnings ratio is 6.9 compared to the industry median at 8.0. 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 0.90.

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.

Franklin Financial Services Corp’s Value Grade

Value Grade:

Franklin Financial Services Corporation is a bank holding company for Farmers and Merchants Trust Company of Chambersburg (the Bank). The Bank is engaged in general commercial, retail banking and trust services associated with community banks. It offers a range of banking services to businesses, individuals, and governmental entities. It provides a range of services, such as accepting and maintaining checking, savings, and time deposit accounts, providing investment and trust services, making loans and providing safe deposit facilities. It offers various deposit products including demand deposits (noninterest and interest-bearing accounts), savings, money management accounts, and time deposits to retail, commercial, and municipal customers. Its investment and trust services department offers all of the personal and corporate trust services associated with community bank trust departments, including estate planning and administration, and corporate and personal trust fund management.

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.

Franklin Financial Services Corp has a Value Score of 70, which is considered to be undervalued.

Franklin Financial Services Corp’s price-earnings ratio is 11.0 compared to the industry median at 8.0. This means that it has a higher price relative to its earnings compared to its peers. This makes Franklin Financial Services Corp less attractive for value investors.

Franklin Financial Services Corp’s price-to-book ratio is lower than its peers. This could make Franklin Financial Services Corp more attractive for value investors when compared to the industry median at 0.90.

You can read more about Franklin Financial Services 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.

Juniata Valley Financial Corp’s Value Grade

Value Grade:

Juniata Valley Financial Corp. is a bank holding company of The Juniata Valley Bank. The Company provides retail and commercial banking and other financial services through 15 branches. The Company offers a full range of consumer and commercial banking services. Its consumer banking services include online account opening; online banking, mobile banking, telephone banking, automated teller machines, personal checking accounts, checking overdraft privileges, money market deposit accounts, savings accounts, debit cards, certificates of deposit, individual retirement accounts, secured lines of credit, construction and mortgage loans, and safe deposit boxes. Its commercial banking services include low and high-volume business checking accounts, online account management services, remote deposit capability, ACH origination, payroll direct deposit, commercial lines of credit, commercial letters of credit, mobile deposit for small business customers, and commercial term and demand 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.

Juniata Valley Financial Corp has a Value Score of 65, which is considered to be undervalued.

Juniata Valley Financial Corp’s price-earnings ratio is 8.0 compared to the industry median at 8.0. This means that it has a higher price relative to its earnings compared to its peers. This makes Juniata Valley Financial Corp fairly attractive for value investors.

Juniata Valley Financial Corp’s price-to-book ratio is lower than its peers. This could make Juniata Valley Financial Corp more attractive for value investors when compared to the industry median at 0.90.

You can read more about Juniata Valley 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.

South Plains Financial Inc’s Value Grade

Value Grade:

South Plains Financial Inc. is a bank holding company for City Bank (the Bank). Through City Bank, the Company provides a range of commercial and consumer financial services to small and medium-sized businesses and individuals in its market areas. Its principal business activities include commercial and retail banking, along with investment, trust and mortgage services. The Bank is primarily involved in real estate, commercial, agricultural and consumer lending activities with customers throughout Texas and Eastern New Mexico. Its commercial real estate portfolio includes loans for commercial property that is owned by real estate investors, construction loans to build owner-occupied properties, and loans to developers of commercial real estate investment properties and residential developments. Its loans to consumers include 1-4 family residential loans, auto loans, and other loans for recreational vehicles or other purposes.

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.

South Plains Financial Inc has a Value Score of 78, which is considered to be undervalued.

South Plains Financial Inc’s price-earnings ratio is 7.0 compared to the industry median at 8.0. This means that it has a lower price relative to its earnings compared to its peers. This makes South Plains Financial Inc more attractive for value investors.

South Plains Financial Inc’s price-to-book ratio is lower than its peers. This could make South Plains Financial Inc more attractive for value investors when compared to the industry median at 0.90.

You can read more about South Plains 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 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.

• Arrow Financial Corporation stock has a Value Grade of B.
• Bankinter SA - ADR stock has a Value Grade of A.
• Coastal Carolina Bancshares, Inc. stock has a Value Grade of B.
• Franklin Financial Services Corp stock has a Value Grade of B.
• Juniata Valley Financial Corp stock has a Value Grade of B.
• South Plains Financial Inc 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 Thursday, November 09
• 7 Undervalued Banks Stocks for Wednesday, November 08
• Why Metropolitan Bank Holding Corp’s (MCB) Stock Is Down 4.97%
• Why Mitsubishi UFJ Financial Group Inc (ADR)’s (MUFG) Stock Is Down 5.48%

AAII Disclaimer

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