Federated Hermes, Inc. (FHI): what the price requires
At today's price, Federated Hermes, Inc. (FHI) is priced for -0.8% earnings growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/FHI
Headline
| Field | Value |
|---|---|
| Ticker | FHI |
| Company | Federated Hermes, Inc. |
| Current price | $58.05/sh |
| Composition | Investment Advisory Fees, net - Affiliates 52% / Investment Advisory Fees, net - Other 14% / Administrative Service Fees, net - Affiliates 23% / Other Service Fees, net - Affiliates 8% / Other Service Fees, net - Other 2% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | fee-financial |
| Implied earnings growth | -0.8% |
| Price-to-earnings | 16.3x |
| Earnings yield | 6.2% |
Solve inputs: computed at a 9.2% cost of equity with 4% terminal growth over a 5-year stage, on a 5-year median GAAP earnings base; each 1pp of cost of equity moves the implied earnings growth ~4.2pp.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.27σ |
| cohort percentile (of 49 peers) | 29 |
| implied end-window share | 0% |
Valuation X-Ray
The price is supported by asset-based and earnings-power and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 0.98x | 5 | justifies |
| Earnings | 1.22x | 5 | expensive |
| Relative | 0.77x | 4 | justifies |
| Growth | 0.72x | 3 | justifies |
Families that justify the price: Asset, Earnings, Relative, Growth
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.7%); the inversion above states its own rate.
Per-Model Detail (n=17)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $118.78 | 0.49x | yes | FCF base $0.3B, growth 12% (input: historical growth), terminal g 4.0%, WACC 8.7%, 6yr projection |
| DCF Exit Multiple | Growth | $80.87 | 0.72x | yes | Exit EV/EBITDA: 6.2x / 8.2x / 10.2x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $73.56 | 0.79x | yes | P/E 12x (static sector reference · 2026-04), scenarios: 10.0x / 12.0x / 14.0x (bear / base = reference held flat / bull), EV/EBITDA N/Ax |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $59.31 | 0.98x | yes | BV/sh $16.58, ROE (TTM) 33.1%, ke 9.3% |
| Two-Stage Excess Return | Asset | $118.15 | 0.49x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $53.34 | 1.09x | yes | Rev $1.9B, growth 12% (input: historical growth; tapered), Terminal P/S: 1.9x / 2.3x / 2.7x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $61.80 | 0.94x | yes | EPS $5.15, growth 1% (input: historical EPS growth), PEG=7.90 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $47.47 | 1.22x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.40B × (1−26%) / WACC 8.7% → EPV (no growth) |
| Residual Income | Asset | $91.73 | 0.63x | yes | BV $16.58 + 5yr PV of (ROE (TTM) 33.1% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $43.83 | 1.32x | yes | √(22.5 × EPS $5.15 × BVPS $16.58) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | — | — | no | — |
| FCF Yield | Earnings | $46.17 | 1.26x | yes | FCF $304.4M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $41.66 | 1.39x | yes | SBC-adj FCF $0.27B (FCF $0.30B − SBC $0.03B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $166.17 | 0.35x | yes | EPS $5.15 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $15.57 | 3.73x | yes | BV $16.58 × (ROIC 8.2% / WACC 8.7%) |
| P/Sales Sector | Relative | $76.64 | 0.76x | yes | Revenue $1.86B × sector P/S 3.0x |
| PEG Fair Value | Relative | $193.13 | 0.30x | yes | EPS $5.15 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $55.68 | 1.04x | yes | EPS $5.15 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net cash | $165.4m |
| Net debt / NOPAT (after-tax) | -0.44x (net cash) |
| Net debt / operating income (pre-tax) | -0.33x (net cash) |
| Share count CAGR (buyback) | -4.7% |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
What the balance-sheet methods miss is the whole business. Federated Hermes earns about 33% on equity on a book of only about $17 per share, because an asset manager runs on fees against assets under management, not on capital. Book value is almost irrelevant to what it is worth.
The right lens is fee earnings, and they are at records. Q1 2026 brought EPS of $1.27 on net income of $96.4 million, with total AUM at a record $907 billion, money-market assets at a record $685 billion, and equity assets at a record $101 billion.
The disagreement is the report: it turns on how durable the money-market franchise is.
Bull Case
Traditional valuation models break on a company like this, and that is the opportunity. Run a book-value or asset-based calculation and Federated Hermes looks ordinary, because its tangible equity is only about $17 a share. But the business earns roughly 33% on that equity, and the reason is that an asset manager has almost no capital tied up: it collects fees on the assets it manages, and those fees drop to the bottom line with very little reinvestment. A model that anchors on book value is measuring the wrong thing entirely. The fee earnings are the asset, and they are at record levels.
The scale of those assets is the durable part. Q1 2026 produced record total assets under management of $907.1 billion, up 8% year over year, with money-market assets at a record $684.7 billion and equity assets at an all-time high of $100.8 billion. Money-market funds are the ballast: they are sticky cash-management relationships that institutions and intermediaries do not move casually, and they generate steady fee revenue as long as short rates stay positive. The 10-K spells out the mechanism by which the firm can adjust or waive fees to keep net yields positive (accession 0001056288-26-000007), which is exactly the lever that lets the franchise hold assets through different rate regimes.
The valuation reflects a business the market is paying for cautiously. The DCF lands at $118, the exit-multiple DCF at $82, the relative-valuation method at $74, and the P/S method at $77, all above the current price near $59. EPS of $1.27 beat estimates by about 8%, and the firm continues to return cash and bolt on capability, including a recent majority stake in a private-markets manager. For a buyer who values the right metric, fee earnings on a record and growing asset base, the fee-financial methods say this capital-light compounder is cheap rather than dear.
Bear Case
The bear case is the model disagreement itself, because the methods are telling very different stories and the conservative ones are the more honest read. The growth-DCF reaches $118 and the two-stage excess-return method $118, but the earnings-power method lands at $47, the FCF-yield method at $46, and the SBC-adjusted FCF method at $42, all below the current price near $59 (June 27, 2026). That is not noise. The optimistic methods assume the firm keeps growing fee earnings at a healthy clip; the conservative ones capitalize the cash it produces today with no growth, and on that basis the stock is already full.
The reason to doubt the optimistic side is concentration in the rate-sensitive part of the book. About three-quarters of assets under management, the record $684.7 billion in money-market funds, earn fees that depend on short rates staying high enough to support positive net yields. The 10-K is explicit that the firm implements voluntary yield-related fee waivers to maintain positive or zero net yields when rates fall (accession 0001056288-26-000007), and that distribution costs as a percentage of fund revenue have been rising (accession 0001056288-26-000007). If the Federal Reserve cuts meaningfully, those waivers expand and money-market fee revenue compresses precisely as the largest pool of assets becomes least profitable. The record AUM headline masks a franchise whose biggest piece is most exposed to the rate cycle.
The equity and fixed-income side carries the structural headwind every active manager faces: fee compression and the steady pull toward passive products, which the filing acknowledges among the pressures on performance and flows (accession 0001056288-26-000007). The sell-side reflects the ambivalence, with a consensus around Hold and targets bracketing the price rather than pointing higher. The honest summary is that this is a fairly to richly valued fee business on the conservative methods, cheap only if you trust the growth case, and the growth case leans on a money-market franchise that the next rate-cutting cycle would test.
Valuation
Federated Hermes is a fee financial, so the right lens is fee earnings on assets under management, not the balance sheet. The firm earns about 33% on a small equity base of roughly $17 per share, which is why book-anchored methods understate it: the residual-income method, which credits that high return, lands at $92, while the simple book-based read sits near the price. The business is capital-light, and the value lives in the durability of the fee stream.
The model X-ray spreads unusually wide, and that spread is the valuation. On the optimistic side, the perpetual-growth DCF reaches $118 and the two-stage excess-return method $118; in the middle, the exit-multiple DCF lands at $82, the P/S method at $77, and relative valuation at $74; on the conservative side, the earnings-power method sits at $47, the FCF-yield method at $46, and the SBC-adjusted FCF method at $42. The resulting band runs from about $73 at the low end to $100 at the base and $135 at the high, with reliability tagged as ok, and today's price near $59 sits below even the low end.
That places the stock below where the fee-appropriate methods land but above where the no-growth cash methods land, which is why the composite reads within range as a value-supported name. The deciding variable is the money-market franchise: if short rates stay supportive and AUM keeps compounding, the optimistic methods are the right ones and the stock is cheap; if rates fall and fee waivers expand, the conservative methods win and the discount is deserved.
Catalysts
Q1 2026, reported April 30, was the most recent data point and it set records. EPS came in at $1.27 on net income of $96.4 million, beating estimates by about 8%, with total assets under management reaching a record $907.1 billion, money-market assets a record $684.7 billion, and equity assets an all-time high of $100.8 billion. The next print is the test of whether the equity and money-market momentum holds and whether flows stay positive.
The rate path is the single most important catalyst. With roughly three-quarters of AUM in money-market funds, the trajectory of short rates governs both flows and fee yields, and any move by the Federal Reserve toward cuts would raise the prospect of expanded yield-related fee waivers. Watching the net-yield commentary and waiver disclosure each quarter is the cleanest read on how the largest part of the franchise is faring.
Capability expansion is the other thread. Federated Hermes recently took a majority stake in a private-markets manager, continuing a push to diversify beyond money-market and traditional active products toward higher-fee alternatives. Sentiment is mixed, with a consensus around Hold and price targets that bracket the current price in the mid-$50s rather than pointing decisively higher, reflecting the same money-market dependence the bear case flags.
Sources: prnewswire.com (Q1 2026 record AUM release), gurufocus.com (Q1 2026 results), investing.com (Q1 2026 transcript), marketbeat.com (FHI analyst rating).
Peer Cohorts (Per Segment, With Filing Citations)
Investment Management (single operating segment) (reported)
- APAM (Artisan Partners Asset Management Inc.)
- (no filing in the citation store)
- TROW (PRICE T ROWE GROUP INC)
- (no filing in the citation store)
- BEN (FRANKLIN RESOURCES, INC.)
- (no filing in the citation store)
- IVZ (Invesco Ltd.)
- (no filing in the citation store)
- AMG (AFFILIATED MANAGERS GROUP, INC.)
- (no filing in the citation store)
- CNS (COHEN & STEERS, INC.)
- (no filing in the citation store)
- SEIC (SEI INVESTMENTS COMPANY)
- (no filing in the citation store)
- MORN (MORNINGSTAR, INC.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.