What is a Value Stock?

A value stock is traditionally defined in terms of how investors in the marketplace are valuing that company’s future growth prospects. Low P/E multiples are good base indicators that the company is undervalued and can most likely be labeled as a value stock.

The following stocks are considered to be notable value stocks in the financial services sector:

1. Merchants Bancorp MBIN - P/E: 5.82
2. Community West Bancshares CWBC - P/E: 9.17
3. Midland States Bancorp MSBI - P/E: 9.01
4. First Financial Bancorp FFBC - P/E: 8.14
5. Hilltop Holdings HTH - P/E: 6.94

This quarter, Merchants Bancorp experienced an increase in earnings per share, which was 0.73 in Q1 and is now 1.31. Its most recent dividend yield is at 1.64%, which has decreased by 0.36% from 2.0% in the previous quarter.

Most recently, Community West Bancshares reported earnings per share at 0.14, whereas in Q1 earnings per share sat at 0.19. The company’s most recent dividend yield sits at 2.32%, which has decreased by 0.78% from 3.1% last quarter.

Midland States Bancorp has reported Q2 earnings per share at 0.55, which has increased by 400.0% compared to Q1, which was 0.11. Most recently, the company reported a dividend yield of 7.57%, which has increased by 0.63% from last quarter’s yield of 6.94%.

First Financial Bancorp saw an increase in earnings per share from 0.31 in Q1 to 0.4 now. The company’s most recent dividend yield sits at 6.67%, which has increased by 0.45% from 6.22% last quarter.

This quarter, Hilltop Holdings experienced an increase in earnings per share, which was 0.51 in Q1 and is now 1.08. Most recently, the company reported a dividend yield of 1.86%, which has increased by 0.06% from last quarter’s yield of 1.8%.

The Significance: A value stock may need some time to rebound from its undervalued position. The risk of investing in a value stock is that this emergence may never materialize.