Investors interested in stocks from the Financial - Investment Management sector have probably already heard of Federated Hermes (FHI - Free Report) and SEI Investments (SEIC - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Federated Hermes has a Zacks Rank of #2 (Buy), while SEI Investments has a Zacks Rank of #3 (Hold) right now. This means that FHI's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
FHI currently has a forward P/E ratio of 9.56, while SEIC has a forward P/E of 20.09. We also note that FHI has a PEG ratio of 0.96. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. SEIC currently has a PEG ratio of 1.67.
Another notable valuation metric for FHI is its P/B ratio of 2.19. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, SEIC has a P/B of 4.74.
These are just a few of the metrics contributing to FHI's Value grade of B and SEIC's Value grade of C.
FHI stands above SEIC thanks to its solid earnings outlook, and based on these valuation figures, we also feel that FHI is the superior value option right now.