EP20 Bank Analysis (Part 3): How To Find Undervalued Banks

Support this podcast through your donation: https://paypal.me/valueinvesting

I created three episodes to explain the basics of analyzing bank stocks which are a black box to many investors. This episode covers how you can find undervalued bank stocks through five steps.

  1. Get a list of banks and narrow the list via Price to Book and Price to Earning ratios
  2. Understand why the banks are undervalued in terms of the two ratios.  In many cases, the undervaluation is due to troubled assets or loans
  3. Evaluate whether or not the banks have an appropriate level of capital and reserve relative to troubled assets and loans
  4. Analyze their financial statements (balance sheet and income statement)
  5. Assess the quality of the executive management team via previous shareholder’s letters

Click here (The Bank Investor’s Handbook) to learn more about the book referenced in the episode.

Click here (FDIC website, Data pull instruction) to extract bank data from FDIC website