Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 3 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.

3 Undervalued Banks Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 3 undervalued stocks in the Banks industry for Thursday, November 16, 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.

First Bancorp Inc’s Value Grade

Value Grade:

The First Bancorp, Inc. is a bank holding company of First National Bank (the Bank). The Company, through its Bank, provides a range of banking services to individual and corporate customers from eighteen offices in coastal and eastern Maine. Its services include demand, time, and savings deposits; lending; payment processing; and investment management and trust services. The Company, through First National Wealth Management, a division of the Bank, offers private banking, financial planning, investment management and trust services to individuals, businesses, non-profit organizations and municipalities. Its investment securities are classified into three categories: securities available for sale, securities to be held to maturity and restricted equity securities. It offers a range of loans, including commercial real estate loan, commercial construction loans, municipal loans, residential real estate term loan, home equity line of credit, consumer loan, construction loans among 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.

First Bancorp Inc has a Value Score of 71, which is considered to be undervalued.

When you look at First Bancorp Inc’s price-to-sales ratio at 2.31 compared to the industry median at 1.93, this company has a higher price relative to revenue compared to its peers. This could make First Bancorp Inc’s stock less attractive for value investors.

First Bancorp Inc’s price-earnings ratio is 8.74 compared to the industry median at 8.38. This means it has a higher share price relative to earnings compared to its peers. This could make First Bancorp Inc less attractive for value investors.

Now, let’s assess First Bancorp Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 5.3, 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. First Bancorp Inc’s shareholder yield is higher than its industry median ratio of 3.85%. 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. First Bancorp Inc’s price-to-book ratio is higher than its industry median ratio of 0.94. This could make First Bancorp Inc less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at First 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. First Bancorp Inc’s price-to-free-cash-flow ratio is higher than its industry median ratio of 9.23. This could make First Bancorp Inc less attractive because the higher P/FCF ratio indicates that First 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.

Great American Bancorp Inc’s Value Grade

Value Grade:

Great American Bancorp, Inc. is a thrift holding company. The Company's principal activity is the ownership and management of its wholly owned subsidiary, First Federal Savings Bank of Champaign-Urbana (the Bank). The Bank is primarily engaged in providing a full range of banking and financial services to individual and corporate customers in Champaign County, Illinois. The Bank also provides full-service brokerage activities through a third-party broker-dealer and engages in the sale of tax-deferred annuities. The Bank?s subsidiary, Park Avenue Service Corporation (PASC), offers insurance services to customers located primarily in Illinois. GTPS Insurance Agency, a division of PASC, sells a variety of insurance products to both individuals and businesses, including life, health, auto, property and casualty insurance. It grants mortgage, commercial and consumer loans to customers. The Bank operates through two full-service offices located in Champaign and Urbana, Illinois.

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.

Great American Bancorp Inc has a Value Score of 91, which is considered to be undervalued.

Great American Bancorp Inc’s price-earnings ratio is 5.9 compared to the industry median at 8.4. This means that it has a lower price relative to its earnings compared to its peers. This makes Great American Bancorp Inc more attractive for value investors.

Great American Bancorp Inc’s price-to-book ratio is higher than its peers. This could make Great American Bancorp Inc less attractive for value investors when compared to the industry median at 0.94.

You can read more about Great American 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.

Territorial Bancorp Inc’s Value Grade

Value Grade:

Territorial Bancorp Inc. is a holding company for Territorial Savings Bank (the Bank). The Bank's business consists primarily of accepting deposits from the general public and investing those deposits, together with funds generated from operations and borrowings, in one-to-four-family residential mortgage loans and investment securities. The Bank also originates home equity loans and lines of credit, construction, commercial and other nonresidential real estate loans, consumer loans, multi-family mortgage loans and other loans. The Bank offers a variety of deposit accounts, including passbook and statement savings accounts, certificates of deposit, money market accounts, commercial and regular checking accounts, and Super negotiable order of withdrawal (NOW) accounts. Through its subsidiary, Territorial Financial Services, Inc., it engages in insurance agency activities. It also offers various non-deposit investments to our customers, including annuities and mutual funds.

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.

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

Territorial Bancorp Inc’s price-earnings ratio is 8.0 compared to the industry median at 8.4. This means that it has a lower price relative to its earnings compared to its peers. This makes Territorial Bancorp Inc more attractive for value investors.

Territorial Bancorp Inc’s price-to-book ratio is higher than its peers. This could make Territorial Bancorp Inc less attractive for value investors when compared to the industry median at 0.94.

You can read more about Territorial 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.

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 3 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.

• First Bancorp Inc stock has a Value Grade of B.
• Great American Bancorp Inc stock has a Value Grade of A.
• Territorial Bancorp Inc stock has a Value Grade of A.

Now that you have a bit more background about each of the 3 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.

• 3 Undervalued Banks Stocks for Thursday, November 16
• Which Is a Better Investment, Seacoast Banking Corporation of Florida or TowneBank Stock?
• 7 Undervalued Banks Stocks for Wednesday, November 15
• Why Citizens Financial Services Inc’s (CZFS) Stock Is Up 4.64%

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.