Analyzing Federated Hermes (NYSE:FHI) and Interactive Brokers Group (NASDAQ:IBKR)

Interactive Brokers Group (NASDAQ:IBKR) and Federated Hermes (NYSE:FHI) are both finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their dividends, risk, institutional ownership, earnings, profitability, valuation and analyst recommendations.

Risk & Volatility

Interactive Brokers Group has a beta of 1.35, meaning that its stock price is 35% more volatile than the S&P 500. Comparatively, Federated Hermes has a beta of 0.65, meaning that its stock price is 35% less volatile than the S&P 500.

Institutional & Insider Ownership

23.8% of Interactive Brokers Group shares are owned by institutional investors. Comparatively, 75.9% of Federated Hermes shares are owned by institutional investors. 2.8% of Interactive Brokers Group shares are owned by insiders. Comparatively, 4.2% of Federated Hermes shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Earnings & Valuation

This table compares Interactive Brokers Group and Federated Hermes”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Interactive Brokers Group	$10.42 billion	14.80	$984.00 million	$2.50	36.28
Federated Hermes	$1.80 billion	2.37	$403.30 million	$5.38	10.61

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

Dividends

Interactive Brokers Group pays an annual dividend of $0.35 per share and has a dividend yield of 0.4%. Federated Hermes pays an annual dividend of $1.52 per share and has a dividend yield of 2.7%. Interactive Brokers Group pays out 14.0% 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. Interactive Brokers Group has increased its dividend for 2 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 longer track record of dividend growth.

Analyst Ratings

This is a breakdown of current ratings and price targets for Interactive Brokers Group and Federated Hermes, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Interactive Brokers Group	0	5	7	2	2.79
Federated Hermes	1	4	1	2	2.50

Interactive Brokers Group presently has a consensus price target of $98.90, suggesting a potential upside of 9.05%. Federated Hermes has a consensus price target of $57.40, suggesting a potential upside of 0.56%. Given Interactive Brokers Group’s stronger consensus rating and higher possible upside, analysts clearly believe Interactive Brokers Group is more favorable than Federated Hermes.

Profitability

This table compares Interactive Brokers Group and Federated Hermes’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Interactive Brokers Group	9.94%	5.37%	0.52%
Federated Hermes	21.30%	34.03%	18.54%

Summary

Interactive Brokers Group beats Federated Hermes on 9 of the 17 factors compared between the two stocks.

About Interactive Brokers Group

Interactive Brokers Group, Inc. operates as an automated electronic broker worldwide. The company engages in the execution, clearance, and settlement of trades in stocks, options, futures, foreign exchange instruments, bonds, mutual funds, exchange traded funds (ETFs), precious metals, and cryptocurrencies. It also custodies and services accounts for hedge and mutual funds, ETFs, registered investment advisors, proprietary trading groups, introducing brokers, and individual investors. In addition, the company offers custody, prime brokerage, securities, and margin lending services. It serves institutional and individual customers through electronic exchanges and market centers. The company was founded in 1977 and is headquartered in Greenwich, 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.