CME Group (NASDAQ:CME) versus Federated Hermes (NYSE:FHI) Financial Survey

Federated Hermes (NYSE:FHI) and CME Group (NASDAQ:CME) are both finance companies, but which is the better investment? We will compare the two companies based on the strength of their dividends, risk, institutional ownership, earnings, analyst recommendations, profitability and valuation.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Federated Hermes	21.28%	33.94%	18.30%
CME Group	63.33%	16.23%	2.23%

Volatility & Risk

Federated Hermes has a beta of 0.67, suggesting that its stock price is 33% less volatile than the S&P 500. Comparatively, CME Group has a beta of 0.15, suggesting that its stock price is 85% less volatile than the S&P 500.

Dividends

Federated Hermes pays an annual dividend of $1.52 per share and has a dividend yield of 2.4%. CME Group pays an annual dividend of $5.20 per share and has a dividend yield of 1.6%. Federated Hermes pays out 27.4% of its earnings in the form of a dividend. CME Group pays out 42.7% 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 raised 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.

Earnings and Valuation

This table compares Federated Hermes and CME 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	2.65	$403.30 million	$5.54	11.66
CME Group	$6.52 billion	17.34	$4.07 billion	$12.19	25.91

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

Institutional and Insider Ownership

75.9% of Federated Hermes shares are held by institutional investors. Comparatively, 87.7% of CME Group shares are held by institutional investors. 4.2% of Federated Hermes shares are held by company insiders. Comparatively, 0.3% of CME Group shares are held by company 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.

Analyst Ratings

This is a summary of recent recommendations and price targets for Federated Hermes and CME Group, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Federated Hermes	1	5	0	2	2.38
CME Group	2	6	10	0	2.44

Federated Hermes presently has a consensus price target of $60.80, indicating a potential downside of 5.89%. CME Group has a consensus price target of $314.44, indicating a potential downside of 0.45%. Given CME Group’s stronger consensus rating and higher possible upside, analysts clearly believe CME Group is more favorable than Federated Hermes.

Summary

CME Group beats Federated Hermes on 10 of the 18 factors compared between the two stocks.

About Federated Hermes

Federated Hermes, Inc. is a global investment manager headquartered in Pittsburgh, Pennsylvania. Founded in 1955 as Federated Investors, the company adopted the Federated Hermes name in 2020, following its acquisition of London-based Hermes Investment Management. The company offers investment strategies and services across money markets, equities, fixed income, multi-asset and alternative investments. Its products and services include mutual funds, separately managed accounts and institutional investment solutions, along with liquidity management and stewardship services.

About CME Group

CME Group operates a global marketplace for derivatives and other financial products. Through its exchanges—CME, CBOT, NYMEX and COMEX—it offers futures and options contracts tied to interest rates, equity indexes, foreign exchange, energy, agricultural products and metals. The company also provides clearing and settlement services, market data and related products. Its electronic trading platform, CME Globex, supports access to its markets by participants around the world, alongside its open-outcry and privately negotiated trading services.