Federated Hermes (FHI) just wrapped up FY 2025 with fourth quarter revenue of US$482.8 million and basic EPS of US$1.45, while trailing twelve month revenue came in at about US$1.8 billion and EPS at US$5.37. Over the past year, the company has seen revenue move from US$1.63 billion and EPS of US$3.23 on a trailing basis at the end of 2024 to the latest trailing totals of US$1.8 billion and US$5.37. This sets up a picture where higher earnings, a 22.4% net margin, and a 2.55% dividend yield sit alongside more cautious earnings forecasts and insider selling. Overall, the release points to solid profitability that investors will likely weigh against the softer growth outlook.

With the headline numbers on the table, the next step is to see how this earnings story lines up with the most widely followed narratives around Federated Hermes, and where those stories might need a rethink.

22.4% net margin with US$403.3 million in annual profit

• On a trailing basis, Federated Hermes earned US$403.3 million of net income on US$1.8b of revenue, giving a 22.4% net margin compared with 15.7% a year earlier.
• Bulls often focus on earnings strength, and the 57.1% trailing earnings growth over the past year alongside this higher margin heavily supports that view, even though five year earnings growth of 3.7% per year shows that this pace has not always been as strong.
  • Supporters can point to EPS on a trailing basis moving from US$3.23 at the end of 2024 to US$5.37 now as evidence that recent profitability is meaningfully higher than it was a year ago.
  • At the same time, revenue growth of 2.1% per year versus 10.6% for the broader US market gives bears room to argue that earnings momentum is being helped more by margins than by top line expansion.

AUM edges up while flows stay mixed in FY 2025

• Assets under management moved from US$199.2b at the start of FY 2025 to US$220.0b by year end, even as quarterly net flows swung from US$1.1b of inflows in Q1 to outflows of US$466 million, US$140 million, and US$1.2b in Q2, Q3, and Q4.
• What stands out for a more cautious, bearish view is that these outflows sit alongside the forecast that earnings could decline by about 0% per year over the next three years, which contrasts with the recent 57.1% earnings growth and raises the question of how durable that growth is if flows remain under pressure.
  • Critics highlight that three consecutive quarters of outflows in 2025, totaling roughly US$1.8b, occurred even as quarterly revenue stepped up from US$423.5 million in Q1 to US$482.8 million in Q4, suggesting markets and mix are doing part of the heavy lifting.
  • They also point to revenue growth running at 2.1% per year compared with 10.6% for the US market, arguing this slower top line trend is consistent with the flat earnings forecasts despite the strong trailing margin and EPS figures.

P/E of 9.8x and 2.55% yield versus flat earnings forecasts

• Shares trade on a P/E of 9.8x with a 2.55% dividend yield and a price of US$53.28, which is around 10% below the DCF fair value of US$59.23 and below peer and industry P/E averages of 15.7x and 23.9x respectively.
• Supporters of a bullish angle see the lower P/E and discount to the DCF fair value as compensation for slower revenue growth and flat earnings forecasts, while skeptics focus on the forecast 0% earnings trend and recent insider selling as reasons to question how much weight to put on the valuation gap.
  • On the reward side, the combination of a 22.4% net margin, the 2.55% yield, and trading about 10% below the DCF fair value offers several concrete numbers that value oriented investors often watch closely.
  • On the risk side, the flagged expectation of flat to slightly declining earnings over the next three years, together with reported insider selling in the past three months, gives bears specific data points to argue that the current multiples might stay below peer and industry averages.

Next Steps

Don't just look at this quarter; the real story is in the long-term trend. We've done an in-depth analysis on Federated Hermes's growth and its valuation to see if today's price is a bargain. Add the company to your watchlist or portfolio now so you don't miss the next big move.

See What Else Is Out There

Federated Hermes combines strong recent profitability with three consecutive quarters of outflows, slower 2.1% revenue growth, and flat earnings forecasts versus the broader US market.

If you would rather focus on companies with more consistent revenue and earnings trends, use our stable growth stocks screener (2167 results) today to quickly zero in on businesses built around steadier growth profiles.

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.