A Fresh Look at Federated Hermes’s Valuation After Launching the MDT Market Neutral ETF

Federated Hermes (FHI) has rolled out the Federated Hermes MDT Market Neutral ETF, expanding on a long history of managing market neutral strategies. This new launch is designed to broaden the firm's ETF offerings for investors.

See our latest analysis for Federated Hermes.

Federated Hermes’ push into market neutral ETFs builds on its history of innovative product launches, but lately the share price action has not mirrored this momentum. After a flat stretch earlier in the year, the recent product launch comes as the 1-year total shareholder return has picked up to 46%. This outpaces the underlying share price movement and suggests renewed confidence from investors over the longer term.

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But with shares outperforming the broader market and a history of steady returns, investors may be questioning whether Federated Hermes is now undervalued or if its recent success has already been priced in, leaving them to consider if a true buying opportunity still exists.

Most Popular Narrative: 2% Overvalued

Federated Hermes ended the last session at $51.37, which is around 2% above the narrative's estimated fair value of $50.29. The setup for this narrative rests on a blend of powerful growth themes and industry crosswinds, shaping how the company's future is being modeled.

Expansion in digital asset infrastructure, including active participation in tokenized money market funds and collaborative blockchain initiatives with major institutions, is expected to broaden product distribution channels, attract new client segments, and drive future AUM and revenue growth.

Read the complete narrative.

What does the forecasted margin compression mean for future earnings? The narrative’s fair value hinges on a blend of muted revenue growth, market share tensions, and a profit multiple that stands out for capital markets. Consider which forward-looking signals tip the scales in this target. Curious about the details? Read the full story to see how these forces shape the fair value.

Result: Fair Value of $50.29 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, risks remain, such as intensifying competition and the potential for ongoing fee compression. Both of these factors could challenge Federated Hermes’ positive outlook.

Find out about the key risks to this Federated Hermes narrative.

Another View: Peer Comparisons Paint a Different Picture

Taking a closer look at Federated Hermes' valuation using its price-to-earnings ratio, the company trades at 10.9x, which is well below both the US Capital Markets industry average of 26.3x and its peer average of 15x. It is also under the fair ratio of 12.9x that the market could shift toward. This suggests the shares might offer relatively good value, but could also reflect caution about future growth. Might investors be overlooking hidden risks or an opportunity?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Federated Hermes Narrative

If you see things differently or would like to dive into the numbers yourself, you can craft your own take on Federated Hermes in just a few short minutes. Do it your way

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding Federated Hermes.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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