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 Tuesday, November 14, 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.

Banco de Chile (ADR)’s Value Grade

Value Grade:

Banco de Chile is a full service financial institution, which is engaged in providing credit and non-credit products and services in Chile. The Bank offers a range of banking services to its customers, ranging from individuals to corporations. The Bank's segments include Retail, which focuses on individuals and small and medium-sized companies, where the product offering focuses on consumer loans, commercial loans, checking accounts, credit cards, credit lines and mortgage loans; Wholesale, which focuses on corporate clients and companies, where the product offering focuses on commercial loans, checking accounts and liquidity management services, debt instruments, foreign trade, derivative contracts and leases; Treasury, which includes the associated revenues to the management of the investment portfolio and the business of financial transactions and currency trading, and Subsidiaries, which corresponds to companies and corporations controlled by the Bank.

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.

Banco de Chile (ADR) has a Value Score of 74, which is considered to be undervalued.

When you look at Banco de Chile (ADR)’s price-to-sales ratio at 2.34 compared to the industry median at 1.86, this company has a higher price relative to revenue compared to its peers. This could make Banco de Chile (ADR)’s stock less attractive for value investors.

Banco de Chile (ADR)’s price-earnings ratio is 7.82 compared to the industry median at 8.05. This means it has a lower share price relative to earnings compared to its peers. This could make Banco de Chile (ADR) more attractive for value investors.

Now, let’s assess Banco de Chile (ADR)’s EV/EBITDA ratio, also known as enterprise multiple. At 8.6, when compared to the industry median of 5.4, 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. Banco de Chile (ADR)’s shareholder yield is higher than its industry median ratio of 4.11%. 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. Banco de Chile (ADR)’s price-to-book ratio is higher than its industry median ratio of 0.89. This could make Banco de Chile (ADR) less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Banco de Chile (ADR)’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Banco de Chile (ADR)’s price-to-free-cash-flow ratio is lower than its industry median ratio of 8.72. This could make Banco de Chile (ADR) more attractive because the lower P/FCF ratio indicates that Banco de Chile (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.

Barclays PLC (ADR)’s Value Grade

Value Grade:

Barclays PLC is a United Kingdom-based global financial services provider that is engaged in retail banking, credit cards, wholesale banking, investment banking, wealth management, and investment management services. The Company operates as two divisions, which include Barclays UK and Barclays International, supported by its service company, Barclays Execution Services. Barclays UK consists of its UK Personal Banking, UK Business Banking and Barclaycard Consumer UK businesses. These businesses are carried on by its UK ring-fenced bank (Barclays Bank UK PLC) and certain other entities. Barclays International consists of its corporate and investment bank and consumer, cards, and payments businesses. These businesses are carried on by its non-ring-fenced bank (Barclays Bank PLC) and its subsidiaries, and certain other entities. Barclays Execution Services provides technology, operations, and functional services to businesses. Its operations include consumer banking and payments 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.

Barclays PLC (ADR) has a Value Score of 100, which is considered to be undervalued.

Barclays PLC (ADR)’s price-earnings ratio is 4.1 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 Barclays PLC (ADR) more attractive for value investors.

Barclays PLC (ADR)’s price-to-book ratio is higher than its peers. This could make Barclays PLC (ADR) less attractive for value investors when compared to the industry median at 0.89.

You can read more about Barclays PLC (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.

Bancolombia SA (ADR)’s Value Grade

Value Grade:

Bancolombia S.A. (Bancolombia) is a financial institution engaged in providing a range of financial products and services to a diversified individual, corporate, and government customer base throughout Colombia, Latin America and the Caribbean region. The Bank operates through 10 segments: Banking Colombia, Banking Panama, Banking El Salvador, Leasing, Trust, Investment Banking, Brokerage, Off Shore and All other. It delivers its products and services through its regional network comprising Colombia's non-Government owned banking network, El Salvador's financial conglomerate by gross loans, Guatemala's bank, Panama's bank and off-shore banking subsidiaries in Panama, Cayman and Puerto Rico, as well as subsidiaries in Peru. The Bank and its subsidiaries offer Savings And Investment, Ahorro A La Mano, Financing, Mortgage Banking, Factoring, Financial and Operating Leases, Capital Markets, eTrading, Cash Management, Foreign Currency, Bancassurance, Investment Banking and Trust 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.

Bancolombia SA (ADR) has a Value Score of 98, which is considered to be undervalued.

Bancolombia SA (ADR)’s price-earnings ratio is 4.1 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 Bancolombia SA (ADR) more attractive for value investors.

Bancolombia SA (ADR)’s price-to-book ratio is higher than its peers. This could make Bancolombia SA (ADR) less attractive for value investors when compared to the industry median at 0.89.

You can read more about Bancolombia 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.

Eagle Financial Services Inc’s Value Grade

Value Grade:

Eagle Financial Services, Inc. is a bank holding company for Bank of Clarke (the Bank). The Bank offers a range of retail and commercial banking services, including demand, savings and time deposits and consumer, mortgage and commercial loans. It operates through two segments, including community banking and marine lending. The Bank has over 13 full-service branches, two loan production offices, and one drive-through-only facility. The Bank has over 13 automated teller machine (ATM) locations in its trade area, and issues debit cards to deposit customers. The Bank offers telephone banking, Internet banking, and mobile banking to its customers. The Bank offers other commercial deposit account services, such as automated clearing house origination and remote deposit capture. The Bank has Virginia offices located in Clarke County, Frederick County, Fauquier County, Loudoun County, and Fairfax County, as well as the Towns of Leesburg, Ashburn and Purcellville, and the City of Winchester.

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.

Eagle Financial Services Inc has a Value Score of 64, which is considered to be undervalued.

Eagle Financial Services Inc’s price-earnings ratio is 10.5 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 Eagle Financial Services Inc less attractive for value investors.

Eagle Financial Services Inc’s price-to-book ratio is lower than its peers. This could make Eagle Financial Services Inc more attractive for value investors when compared to the industry median at 0.89.

You can read more about Eagle Financial Services 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.

Merchants & Marine Bancorp Inc’s Value Grade

Value Grade:

Merchants & Marine Bancorp, Inc. is a holding company of Merchants & Marine Bank (the Bank). The Company’s principal activity is the ownership and management of the Bank. The Bank generates commercial, mortgage and consumer loans and receives deposits from customers located in Jackson, George, Lamar and Forrest Counties in Mississippi and Baldwin and Mobile Counties in Alabama. The Bank operates under a state bank charter and provides full banking services. Canvas Mortgage, a division of the Bank, originates mortgage loans for sale in the secondary market. The Bank offers a portfolio of loans, which include residential real estate, nonresidential real estate, consumer, commercial and other.

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.

Merchants & Marine Bancorp Inc has a Value Score of 63, which is considered to be undervalued.

Merchants & Marine Bancorp Inc’s price-earnings ratio is 13.8 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 Merchants & Marine Bancorp Inc less attractive for value investors.

Merchants & Marine Bancorp Inc’s price-to-book ratio is lower than its peers. This could make Merchants & Marine Bancorp Inc fairly attractive for value investors when compared to the industry median at 0.89.

You can read more about Merchants & Marine 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.

United Security Bancshares’s Value Grade

Value Grade:

United Security Bancshares is a bank holding company for its wholly owned subsidiary, United Security Bank (the Bank). The Bank is a state-chartered bank and operates three branches. The Bank has interactive teller machines (ITMs) at all branch locations and four off-site ITMs and five off-site ATMs at nine different non-branch locations. The Bank offers a full range of commercial banking services primarily to the business and professional community and individuals located in Fresno, Madera, Kern, and Santa Clara Counties, including a variety of deposit instruments including personal and business checking accounts and savings accounts, interest-bearing negotiable order of withdrawal (NOW) accounts, money market accounts, and time certificates of deposit. The Bank also offers a full complement of lending activities, including real estate mortgage, commercial and industrial, real estate construction, agricultural, and installment 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.

United Security Bancshares has a Value Score of 88, which is considered to be undervalued.

United Security Bancshares’s price-earnings ratio is 7.1 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 United Security Bancshares more attractive for value investors.

United Security Bancshares’s price-to-book ratio is lower than its peers. This could make United Security Bancshares more attractive for value investors when compared to the industry median at 0.89.

You can read more about United Security Bancshares’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.

• Banco de Chile (ADR) stock has a Value Grade of B.
• Barclays PLC (ADR) stock has a Value Grade of A.
• Bancolombia SA (ADR) stock has a Value Grade of A.
• Eagle Financial Services Inc stock has a Value Grade of B.
• Merchants & Marine Bancorp Inc stock has a Value Grade of B.
• United Security Bancshares stock has a Value Grade of A.

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 Tuesday, November 14
• Which Is a Better Investment, Banco Santander-Chile (ADR) or Inter & Co Inc Stock?
• Which Is a Better Investment, East West Bancorp Inc or Inter & Co Inc Stock?
• Which Is a Better Investment, First Bancorp or Inter & Co Inc Stock?

AAII Disclaimer

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