Critical Survey: B. Riley Financial (NASDAQ:RILY) versus Federated Hermes (NYSE:FHI)

B. Riley Financial (NASDAQ:RILYGet Rating) and Federated Hermes (NYSE:FHIGet Rating) are both business services companies, but which is the better stock? We will contrast the two businesses based on the strength of their dividends, institutional ownership, valuation, earnings, analyst recommendations, profitability and risk.

Analyst Recommendations

This is a summary of recent ratings for B. Riley Financial and Federated Hermes, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
B. Riley Financial 0 0 0 0 N/A
Federated Hermes 1 1 2 0 2.25

Federated Hermes has a consensus target price of $34.50, indicating a potential downside of 7.90%. Given Federated Hermes’ higher possible upside, analysts clearly believe Federated Hermes is more favorable than B. Riley Financial.

Dividends

B. Riley Financial pays an annual dividend of $4.00 per share and has a dividend yield of 9.0%. Federated Hermes pays an annual dividend of $1.08 per share and has a dividend yield of 2.9%. B. Riley Financial pays out -211.6% of its earnings in the form of a dividend. Federated Hermes pays out 39.4% 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. B. Riley Financial is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares B. Riley Financial and Federated Hermes’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
B. Riley Financial -3.78% 0.16% 0.02%
Federated Hermes 18.05% 25.31% 13.07%

Volatility and Risk

B. Riley Financial has a beta of 1.7, indicating that its stock price is 70% more volatile than the S&P 500. Comparatively, Federated Hermes has a beta of 1.03, indicating that its stock price is 3% more volatile than the S&P 500.

Earnings & Valuation

This table compares B. Riley Financial and Federated Hermes’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
B. Riley Financial $1.74 billion 0.73 $445.05 million ($1.89) -23.60
Federated Hermes $1.30 billion 2.56 $270.29 million $2.74 13.67

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

Insider and Institutional Ownership

58.0% of B. Riley Financial shares are owned by institutional investors. Comparatively, 81.4% of Federated Hermes shares are owned by institutional investors. 27.9% of B. Riley Financial shares are owned by company insiders. Comparatively, 5.0% of Federated Hermes shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Summary

Federated Hermes beats B. Riley Financial on 9 of the 15 factors compared between the two stocks.

About B. Riley Financial

(Get Rating)

B. Riley Financial, Inc., through its subsidiaries, provides investment banking and financial services to corporate, institutional, and high net worth clients in North America, Australia, and Europe. The company operates in six segments: Capital Markets, Wealth Management, Auction and Liquidation, Financial Consulting, Principal Investments-Communications, and Brands. The Capital Markets segments offers investment banking, corporate finance, financial advisory, research, securities lending and sales, and trading services; merger and acquisitions, restructuring advisory, initial and secondary public offerings, and institutional private placements services; asset management services; and trades in equity securities. The Wealth Management segment provides wealth management and tax services. The Auction and Liquidation Segment offers retail store liquidation, and wholesale and industrial assets disposition services. The Financial Consulting segment provides bankruptcy, forensic accounting, litigation support, operations management and real estate consulting, and valuation and appraisal services. The Principal Investments-Communications segment provides consumer Internet access through United Online under the NetZero and Juno brands; VoIP communication and related products, and subscription services through magicJack; and mobile phone services and devices through Marconi Wireless. The Brands segments provides licensing of a brand investment portfolio, including Catherine Malandrino, English Laundry, Joan Vass, Kensie Girl, Limited Too, and Nanette Lepore. It also offers advisory services; brokerage services; senior secured and second lien secured loans to middle market public and the private U.S. companies; and consulting services. The company was formerly known as Great American Group, Inc. and changed its name to B. Riley Financial, Inc. in November 2014. The company was founded in 1973 and is headquartered in Los Angeles, California.

About Federated Hermes

(Get Rating)

Federated Hermes, Inc. is a publicly owned asset management holding company. 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.

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