Houlihan Lokey
HLI
$135.27
-0.09%
Houlihan Lokey, Inc. is a global investment bank providing mergers and acquisitions, capital markets, financial restructuring, valuation, and strategic consulting services to corporations, institutions, and governments. The firm operates through three segments: Corporate Finance, Financial Restructuring, and Financial and Valuation Advisory Services, positioning itself as a leading independent advisory firm with a strong presence in complex and cross-border transactions. The current investor narrative centers on the cyclical recovery of M&A and restructuring activity, with recent quarterly revenue showing a slight year-over-year decline, while the stock has experienced significant volatility, trading well below its 52-week high. Attention is focused on management's ability to navigate a challenging deal-making environment and capitalize on its market position as activity rebounds.…
HLI
Houlihan Lokey
$135.27
Investment Opinion: Should I buy HLI Today?
We rate HLI as a Hold. The consensus analyst rating is 'Buy' with an average target price of $153.50, implying 12.0% upside, but the stock's recent price action and fundamental trends warrant caution. The thesis is that HLI is a high-quality franchise that will benefit from a cyclical recovery, but the timing of that recovery is uncertain. Supporting evidence includes the forward PE of 15.7x, which is below the trailing PE of 22.4x, indicating expected earnings growth. The company's ROE of 18.2% and gross margin of 98.7% are superior to industry averages, and the balance sheet is solid. However, the stock has underperformed the market by 49.2% over the past year, and revenue declined in the latest quarter. The biggest risks are a prolonged M&A slump and margin compression. This Hold would upgrade to Buy if the stock price falls below $125, offering a margin of safety, or if quarterly revenue growth turns positive. It would downgrade to Sell if the forward PE expands above 20x without corresponding earnings growth. Overall, HLI is fairly valued relative to its history, but at a premium to peers, reflecting its quality.
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HLI 12-Month Price Forecast
The AI model assesses HLI as neutral, reflecting the balance between its high-quality franchise and the uncertain near-term outlook. The stock's low forward PE suggests the market is pricing in a recovery, but the lack of concrete evidence of a rebound makes it risky. The model would upgrade to bullish if quarterly revenue growth turns positive and margins stabilize, or if the stock price drops to a level that provides a greater margin of safety. Conversely, a downgrade to bearish would occur if revenue declines accelerate or if the forward PE expands without corresponding earnings growth.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Houlihan Lokey's 12-month outlook, with a consensus price target around $153.50 and implied upside of +13.5% versus the current price.
Average Target
$153.50
0 analysts
Implied Upside
+13.5%
vs. current price
Analyst Count
—
covering this stock
Price Range
$145 - $177
Analyst target range
Eight analysts cover HLI with a consensus recommendation of 'Buy' (mean rating 2.27). The average target price is $153.50, implying 12.0% upside from the current price of $137.11. The distribution includes 5 buys, 2 holds, and 1 sell, reflecting a moderately bullish stance. The low target of $145.00 suggests a 5.8% upside, while the high target of $177.00 implies 29.1% upside, indicating a wide range of expectations. Recent ratings from KBW, Morgan Stanley, and Goldman Sachs have been reaffirmed as Outperform/Overweight/Buy, while UBS maintains Neutral, showing no recent downgrades. The spread between low and high targets (22%) signals moderate uncertainty about the pace of recovery in M&A and restructuring markets.
Bulls vs Bears: HLI Investment Factors
Houlihan Lokey presents a classic cyclical investment case, with its fortunes tied to the recovery of M&A and restructuring markets. The bull case rests on its dominant market position, strong balance sheet, and attractive forward valuation, while the bear case highlights persistent revenue declines, margin pressure, and significant underperformance. Currently, the bearish evidence is more compelling in the near term, given the lack of visible catalysts for a rebound. The central tension is whether the expected earnings recovery, implied by the low forward PE, will materialize within the next 12 months or be delayed further, which would likely lead to additional downside.
Bullish
- Leading restructuring franchise: HLI is a top-tier independent advisor in financial restructuring, a segment that typically thrives during economic stress. With Financial Restructuring revenue of $110.4M in Q4 FY2026, this counter-cyclical business provides a natural hedge against M&A slowdowns and positions the firm to benefit from rising default rates.
- High profitability and returns: The company maintains exceptional gross margins of 98.7% and a return on equity of 18.2%, well above the industry average of 15%. This demonstrates the scalability of its advisory model and efficient capital deployment, supporting its premium valuation.
- Strong balance sheet: With a debt-to-equity ratio of only 0.21 and a current ratio of 1.53, HLI has ample financial flexibility to weather cyclical downturns and invest in talent during market troughs. This low leverage reduces bankruptcy risk and supports continued dividend payments.
- Analyst consensus Buy with upside: The consensus rating is 'Buy' with an average target price of $153.50, implying 12.0% upside from the current price of $137.11. The high target of $177.00 suggests 29.1% upside, reflecting confidence in a recovery in deal activity.
Bearish
- Revenue decline in Q4: Q4 FY2026 revenue fell 4.6% year-over-year to $635.6M, breaking a trend of sequential growth. This indicates that the M&A slowdown is persisting, and the company has not yet seen a meaningful recovery in deal-making activity.
- Significant underperformance: The stock has lost 30.6% over the past year, while the S&P 500 gained 18.65%. Its relative strength is -49.2% over the same period, showing that HLI has been a major laggard, which may reflect structural headwinds rather than just cyclical weakness.
- Margin compression: Operating margin contracted to 22.5% in Q4 FY2026 from 20.9% in the prior year, indicating rising costs and inefficiencies during the downturn. This margin pressure could persist if revenue growth remains sluggish.
- Premium valuation to peers: HLI trades at a trailing PE of 22.4x versus the industry average of 18x, a 24% premium. If the expected earnings rebound fails to materialize, the stock could de-rate, leading to further downside.
HLI Technical Analysis
Houlihan Lokey's stock is in a pronounced downtrend, having lost 30.6% over the past year, with the current price of $137.11 sitting at 24.7% of its 52-week range (between the low of $112.83 and high of $211.78). This positioning near the lower end of the range suggests bearish sentiment and potential value opportunity, but also reflects persistent selling pressure. The stock's beta of 0.967 indicates volatility roughly in line with the market, yet its relative strength versus the S&P 500 over the past year is -49.2%, underscoring significant underperformance.
Beta
0.97
0.97x market volatility
Max Drawdown
-41.0%
Largest decline past year
52-Week Range
$113-$212
Price range past year
Annual Return
-31.2%
Cumulative gain past year
| Period | HLI Return | S&P 500 |
|---|---|---|
| 1m | +9.6% | -1.4% |
| 3m | -0.3% | +3.3% |
| 6m | -3.0% | +15.1% |
| 1y | -31.2% | +17.2% |
| ytd | -23.3% | +11.8% |
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HLI Fundamental Analysis
Revenue for the fiscal fourth quarter ended March 31, 2026, was $635.6 million, a 4.6% decline year-over-year, breaking a trend of sequential growth from $605.3 million in Q1 to $717.1 million in Q3. The Corporate Finance segment contributed $433.8 million and Financial Restructuring $110.4 million, with the former likely driving the decline due to sluggish M&A activity. Net income for the quarter was $99.8 million, with EPS of $1.50, down from $1.84 in the year-ago quarter, reflecting margin pressure. Gross margin remained exceptionally high at 98.7% (typical for advisory firms), but operating margin contracted to 22.5% from 20.9% in the prior year, indicating cost discipline challenges.
Quarterly Revenue
$635643000.0B
2026-03
Revenue YoY Growth
-4.6%
YoY Comparison
Gross Margin
98.7%
Latest Quarter
Free Cash Flow
$681819000.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is HLI Overvalued?
Given positive net income, the PE ratio is the primary valuation metric. The trailing PE stands at 22.4x, while the forward PE is 15.7x, implying the market expects earnings growth of roughly 42% over the next year. This gap suggests optimism about a rebound in deal activity. Compared to the industry average PE of 18x (from valuation data), HLI trades at a 24% premium, which may be justified by its leading market position in restructuring and higher ROE of 18.2% versus the industry's 15%. Historically, the stock's PE has ranged from 9.7x (Dec 2021) to 30.7x (Sep 2025), and the current 22.4x is near the middle, indicating fair valuation relative to its own history.
PE
22.4x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 16x~31x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
14.6x
Enterprise Value Multiple
Investment Risk Disclosure
Financially, HLI faces risks from its dependence on discretionary deal-making, which is highly cyclical. The 4.6% year-over-year revenue decline in Q4 FY2026 and the contraction in operating margin to 22.5% from 20.9% indicate that the firm is not immune to the downturn. While the balance sheet is strong with a debt-to-equity ratio of 0.21, the company's profitability is sensitive to compensation costs, which are a major expense. If revenue continues to decline, margins could compress further, potentially leading to earnings misses. Additionally, the high payout ratio of 40.9% suggests limited room for dividend growth if earnings fall.
FAQ
The primary risks are: 1) Prolonged M&A downturn, as evidenced by the 4.6% revenue decline in Q4 FY2026, which could persist. 2) Margin compression, with operating margin falling to 22.5%, potentially reducing profitability. 3) Valuation risk, as the stock trades at a 24% premium to peers, leaving room for de-rating. 4) Macro risks, such as high interest rates or a recession, which would further dampen deal activity. The most severe risk is a combination of these factors leading to a drop to the 52-week low of $112.83, representing a potential 17.7% loss from the current price.
The 12-month forecast is balanced, with a base case probability of 50% targeting $145-$155, a bull case probability of 25% targeting $160-$177, and a bear case probability of 25% targeting $112-$125. The base case assumes a gradual recovery in M&A activity, leading to modest revenue growth and stable margins. The most likely scenario is the base case, which aligns with the analyst average target of $153.50. Investors should monitor quarterly revenue trends and management guidance for signs of which scenario is unfolding.
HLI's trailing PE of 22.4x is above the industry average of 18x, suggesting a premium valuation. However, the forward PE of 15.7x indicates that the market expects significant earnings growth, which could justify the premium if realized. Compared to its own history, the current PE is near the middle of its 9.7x to 30.7x range, implying fair value. The PEG ratio of 4.26 is high, signaling that the stock may be overvalued relative to its near-term growth. Overall, HLI is not cheap, but its quality and market position may warrant a premium.
HLI is a good buy for investors with a long-term horizon who believe in a cyclical recovery in M&A and restructuring. The stock offers a 12% upside to the average analyst target of $153.50, and the forward PE of 15.7x is attractive if earnings grow as expected. However, the stock has been a significant underperformer, and the near-term risks are elevated. A better entry point might be near the 52-week low of $112.83, which would provide a larger margin of safety. For investors seeking immediate returns, the stock may not be suitable until there is evidence of a turnaround.
HLI is more suitable for long-term investment due to its cyclical nature and current downturn. The stock has a beta of 0.967, indicating market-like volatility, and has experienced a max drawdown of -41%, making it risky for short-term traders. The company's strong balance sheet and market position suggest it will recover over a multi-year horizon, but the timing is uncertain. A minimum holding period of 3-5 years is recommended to ride out the cycle and benefit from the eventual recovery in M&A and restructuring activity.