Critical Contrast: FactSet Research Systems (NYSE:FDS) & Federated Hermes (NYSE:FHI)

FactSet Research Systems (NYSE:FDS) and Federated Hermes (NYSE:FHI) are both mid-cap finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their institutional ownership, analyst recommendations, valuation, profitability, risk, dividends and earnings.

Institutional & Insider Ownership

91.2% of FactSet Research Systems shares are owned by institutional investors. Comparatively, 75.9% of Federated Hermes shares are owned by institutional investors. 1.2% of FactSet Research Systems shares are owned by insiders. Comparatively, 4.2% of Federated Hermes shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Dividends

FactSet Research Systems pays an annual dividend of $4.64 per share and has a dividend yield of 1.8%. Federated Hermes pays an annual dividend of $1.52 per share and has a dividend yield of 2.5%. FactSet Research Systems pays out 30.6% of its earnings in the form of a dividend. Federated Hermes pays out 28.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. FactSet Research Systems has increased its dividend for 27 consecutive years and Federated Hermes has increased its dividend for 4 consecutive years. Federated Hermes is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings & Valuation

This table compares FactSet Research Systems and Federated Hermes”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
FactSet Research Systems	$2.32 billion	3.98	$597.04 million	$15.18	17.13
Federated Hermes	$1.80 billion	2.49	$403.30 million	$5.38	11.17

FactSet Research Systems has higher revenue and earnings than Federated Hermes. Federated Hermes is trading at a lower price-to-earnings ratio than FactSet Research Systems, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

FactSet Research Systems has a beta of 0.71, suggesting that its share price is 29% less volatile than the S&P 500. Comparatively, Federated Hermes has a beta of 0.65, suggesting that its share price is 35% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for FactSet Research Systems and Federated Hermes, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
FactSet Research Systems	6	10	2	1	1.89
Federated Hermes	1	4	1	2	2.50

FactSet Research Systems presently has a consensus target price of $266.36, suggesting a potential upside of 2.46%. Federated Hermes has a consensus target price of $57.40, suggesting a potential downside of 4.44%. Given FactSet Research Systems’ higher possible upside, research analysts clearly believe FactSet Research Systems is more favorable than Federated Hermes.

Profitability

This table compares FactSet Research Systems and Federated Hermes’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
FactSet Research Systems	23.21%	30.68%	15.43%
Federated Hermes	21.30%	34.03%	18.54%

Summary

FactSet Research Systems beats Federated Hermes on 11 of the 18 factors compared between the two stocks.

About FactSet Research Systems

FactSet Research Systems Inc., a financial data company, provides integrated financial information and analytical applications to the investment community in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company delivers insight and information through the workflow solutions of research, analytics and trading, content and technology solutions, and wealth. It serves portfolio managers, investment banks, asset managers, wealth advisors, corporate clients, and other financial services entities. FactSet Research Systems Inc. was founded in 1978 and is headquartered in Norwalk, Connecticut.

About Federated Hermes

Federated Hermes, Inc. is a publicly owned investment manager. Through its subsidiaries, the firm provides its services to individuals, including high net worth individuals, banking or thrift institutions, investment companies, pension and profit sharing plans, pooled investment vehicles, charitable organizations, state or municipal government entities, and registered investment advisors. Through its subsidiaries, it manages separate client-focused equity, fixed income, balanced and money market mutual funds along with separate client-focused equity, fixed income, money market, and balanced portfolios. Through its subsidiaries, the firm invests in the public equity and fixed income markets across the globe. It invests in growth and value stocks of small-cap, mid-cap, and large-cap companies. The firm makes its fixed income investments in ultra-short, short-term, and intermediate-term mortgage-backed, U.S. Government, U.S. corporate, high yield, and municipal securities. It employs both fundamental and quantitative analysis to make its equity investments. Federated Hermes, Inc. was founded in 1955 and is based in Pittsburgh, Pennsylvania with additional offices in New York City and London, United Kingdom.