Buffett Brain · Research note
Score updated 23 Oct 2026 · analysis from 25 May 2026
FHI· Financial Services
Federated Hermes
Federated Hermes shows strong returns with a 19% ROIC, but its valuation and management quality raise concerns.
Buffett fit
Partial fit
Owner
76
Durability
91
Management
42
Price
31
Score updated 23 Oct 2026 · analysis from 25 May 2026
Buffett's checklist
Each number against Buffett's bar, and where it ranks among Financial Services stocks in our database.
How much profit the business makes on each dollar invested in it. Higher is better.
What is left of each sale after the cost of making the product. A high number often means pricing power.
The cash the business earns for its owners, compared with the price of the whole company.
How fast sales grew each year over the last five years.
How many years of today's profit you pay for at today's price. Lower means cheaper.
How much the company owes compared with what it owns outright. Lower is safer.
The four pillars
How the business measures up on each of Buffett's four tests.
If I owned Federated Hermes, I would focus on maintaining its competitive edge in asset management while ensuring that the return on retained capital exceeds the cost of capital.
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The business has shown consistent profitability over the last five years, with no annual losses and a revenue CAGR of 8.63%.
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Management has reduced share count by 5.36% over the last five years, which is a positive sign of .
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Current yield of 6.91% is below my target of 8-10%, indicating that the stock may be overvalued.
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For and against
The strongest points on each side, with the numbers behind them.
In its favor
5- 1 of 19% sits well above the sector top-quintile cutoff of 9%.
- 2Consistent profitability with positive net income reported for all five years.
- 3Strong share program with a CAGR of -5.36% in share count.
- 4Interest coverage of 40.1 indicates a robust ability to meet debt obligations.
Concerns
5- 1 of 70% is below the sector top-quintile cutoff of 80.2%.
- 2 of 27.4% falls short of the sector top-quintile average of 58.2%.
- 3 decline of 14% year-over-year raises questions about operational efficiency.
- 4Management quality score of 42 suggests potential issues with discipline.
Price history
$57.67+73.1%· 5-year return
Weekly closing prices. Touch or hover the line for a date.
The business
How the business works
Federated Hermes operates as an asset management holding company, managing $1.81B in revenue through various investment vehicles. Its services cater to a diverse clientele, including high net worth individuals and institutional investors. The firm employs both fundamental and quantitative analysis for investments across multiple asset classes. The unit economics are solid, but the recent decline of 14% raises questions.
What other investors would say
The same company, judged by three other documented playbooks.
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