Analyzing Interactive Brokers Group (NASDAQ:IBKR) & Federated Hermes (NYSE:FHI)
by Teresa Graham · The Cerbat GemFederated Hermes (NYSE:FHI – Get Free Report) and Interactive Brokers Group (NASDAQ:IBKR – Get Free Report) are both finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, profitability, risk, analyst recommendations, institutional ownership, dividends and earnings.
Earnings and Valuation
This table compares Federated Hermes and Interactive Brokers Group”s gross revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Federated Hermes | $1.80 billion | 2.37 | $403.30 million | $5.38 | 10.61 |
| Interactive Brokers Group | $10.42 billion | 14.80 | $984.00 million | $2.50 | 36.28 |
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.
Risk and Volatility
Federated Hermes has a beta of 0.65, indicating that its share price is 35% less volatile than the S&P 500. Comparatively, Interactive Brokers Group has a beta of 1.35, indicating that its share price is 35% more volatile than the S&P 500.
Profitability
This table compares Federated Hermes and Interactive Brokers Group’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Federated Hermes | 21.30% | 34.03% | 18.54% |
| Interactive Brokers Group | 9.94% | 5.37% | 0.52% |
Dividends
Federated Hermes pays an annual dividend of $1.52 per share and has a dividend yield of 2.7%. Interactive Brokers Group pays an annual dividend of $0.35 per share and has a dividend yield of 0.4%. Federated Hermes pays out 28.3% of its earnings in the form of a dividend. Interactive Brokers Group pays out 14.0% 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. Federated Hermes has increased its dividend for 4 consecutive years and Interactive Brokers Group has increased its dividend for 2 consecutive years. Federated Hermes is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Institutional & Insider Ownership
75.9% of Federated Hermes shares are owned by institutional investors. Comparatively, 23.8% of Interactive Brokers Group shares are owned by institutional investors. 4.2% of Federated Hermes shares are owned by company insiders. Comparatively, 2.8% of Interactive Brokers Group shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.
Analyst Recommendations
This is a breakdown of recent ratings and recommmendations for Federated Hermes and Interactive Brokers Group, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Federated Hermes | 1 | 4 | 1 | 2 | 2.50 |
| Interactive Brokers Group | 0 | 5 | 7 | 2 | 2.79 |
Federated Hermes presently has a consensus target price of $57.40, indicating a potential upside of 0.56%. Interactive Brokers Group has a consensus target price of $98.90, indicating a potential upside of 9.05%. Given Interactive Brokers Group’s stronger consensus rating and higher probable upside, analysts plainly believe Interactive Brokers Group is more favorable than Federated Hermes.
Summary
Interactive Brokers Group beats Federated Hermes on 9 of the 17 factors compared between the two stocks.
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.
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.