Houlihan Lokey
HLI
$128.34
-7.72%
Houlihan Lokey is a global investment bank specializing in mergers and acquisitions, capital markets, financial restructuring, valuation, and strategic consulting, serving corporations and institutions worldwide. As a leading independent advisory firm, it distinguishes itself through deep expertise in complex restructuring and valuation, consistently ranking among the top M&A advisors globally. The current investor narrative centers on the stock's significant underperformance amid a challenging M&A environment, with a 29% year-over-year decline, as the market debates the timing of a recovery in advisory fee revenues and the impact of sustained high interest rates on deal activity.…
HLI
Houlihan Lokey
$128.34
HLI 12-Month Price Forecast
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Houlihan Lokey's 12-month outlook, with a consensus price target around $169.75 and implied upside of +32.3% versus the current price.
Average Target
$169.75
0 analysts
Implied Upside
+32.3%
vs. current price
Analyst Count
—
covering this stock
Price Range
$155 - $200
Analyst target range
The stock is covered by 8 analysts, with a consensus recommendation of Buy (mean rating 2.27 on a 1-5 scale). The average target price is $169.75, implying approximately 21% upside from the current price of $140.23. The distribution leans bullish, with no sell ratings in the recent institutional ratings data. The target range spans from $155.00 (low) to $200.00 (high), indicating a 29% spread between the most bearish and bullish views. The high target of $200 assumes a recovery in M&A volumes and multiple expansion, while the low target of $155 factors in continued sluggish deal activity. Recent ratings from Keefe, Bruyette & Woods (Outperform), Morgan Stanley (Overweight), and Goldman Sachs (Buy) suggest sustained institutional confidence, though UBS remains Neutral. The wide target spread reflects high uncertainty around the timing of the advisory cycle recovery.
Bulls vs Bears: HLI Investment Factors
Houlihan Lokey presents a classic cyclical recovery debate. The bull case rests on a strong balance sheet, high profitability, and a forward P/E that discounts an earnings rebound, supported by a consensus Buy rating and 21% analyst upside. The bear case highlights ongoing revenue declines, a stock in a deep downtrend, and a premium valuation that leaves little room for error. The single most important tension is the timing of the M&A cycle recovery: if deal activity picks up in the next 12 months, HLI could rerate higher; if the slowdown persists, the stock could test its 52-week low or below. Currently, the bearish momentum is stronger, but the risk/reward is becoming more favorable for patient investors.
Bullish
- Strong Buy Consensus with 21% Upside: 8 analysts rate HLI a Buy with an average target of $169.75, implying 21% upside from $140.23. The low target of $155 still offers 10.5% upside, indicating limited downside risk from current levels.
- Healthy Balance Sheet and Cash Flow: Debt-to-equity is only 0.21 and current ratio is 1.53, providing ample liquidity. Trailing twelve-month free cash flow of $681.8 million supports dividends and strategic investments.
- High Gross Margin and Profitability: Gross margin of 98.7% reflects the asset-light advisory model. Net margin of 15.7% and ROE of 18.2% demonstrate efficient capital use and consistent profitability.
- Forward P/E Discount Signals Earnings Rebound: Forward P/E of 14.89x is well below trailing P/E of 22.44x, implying the market expects significant earnings growth. If M&A activity recovers, earnings could surprise to the upside.
Bearish
- Revenue Declining Amid M&A Slowdown: Q4 FY2026 revenue fell 4.6% YoY to $635.6 million, and the prior three quarters averaged $660.6 million, showing a decelerating trend. The Corporate Finance segment, the largest, is directly impacted by lower M&A volumes.
- Stock in Pronounced Downtrend: HLI is down 28.95% over the past year, trading at 66.2% of its 52-week range. The 3-month change of -11.25% confirms the intermediate downtrend, with the stock near its 52-week low of $130.72.
- Premium Valuation vs. Industry Peers: Trailing P/E of 22.44x is a 50% premium to the Capital Markets sector median of ~15x. This premium prices in a recovery that has not materialized, leaving room for multiple contraction if earnings disappoint.
- Operating Margin Pressure: Operating margin declined to 22.5% in Q4 from 24.9% in the prior quarter, indicating cost pressures. If revenue continues to decline, margins could compress further, hurting earnings.
HLI Technical Analysis
The stock is in a pronounced downtrend, with a 1-year price change of -28.95% and currently trading at $140.23, which is 66.2% of its 52-week range (low $130.72, high $211.78). This positioning near the lower end of the range suggests persistent selling pressure and a lack of bullish conviction, though it could also indicate a potential value zone if fundamentals stabilize. The 1-month price change of +1.62% offers a slight reprieve, but the 3-month change of -11.25% confirms the intermediate downtrend remains intact. The divergence between the slightly positive 1-month and deeply negative 1-year trend may signal a short-term bounce within a longer-term bear market, but not a reversal. The 52-week low of $130.72 provides immediate support, while the 52-week high of $211.78 is a distant resistance. A breakdown below $130.72 could accelerate selling, while a move above $211.78 would require a fundamental catalyst. With a beta of 0.96, the stock's volatility is roughly in line with the market, offering no unusual risk amplification.
Beta
0.96
0.96x market volatility
Max Drawdown
-38.6%
Largest decline past year
52-Week Range
$114-$212
Price range past year
Annual Return
-32.9%
Cumulative gain past year
| Period | HLI Return | S&P 500 |
|---|---|---|
| 1m | -4.3% | -0.7% |
| 3m | -16.2% | +2.9% |
| 6m | -23.8% | +7.2% |
| 1y | -32.9% | +16.9% |
| ytd | -27.2% | +8.8% |
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HLI Fundamental Analysis
Revenue has been volatile, with the most recent quarter (Q4 FY2026, ending March 31, 2026) showing $635.6 million, a decline of 4.6% year-over-year. However, the prior three quarters averaged $660.6 million, indicating a decelerating trend from the $666.4 million reported in Q4 FY2025. The Corporate Finance segment contributed $433.8 million and Financial Restructuring $110.4 million, with the former being the primary growth driver but facing headwinds from lower M&A volumes. The company remains profitable, with net income of $99.8 million in the latest quarter and a net margin of 15.7%. Gross margin is exceptionally high at 98.7%, typical for advisory firms, while operating margin was 22.5%, down from 24.9% in the prior quarter, suggesting some cost pressure. The balance sheet is healthy, with a debt-to-equity ratio of 0.21 and a current ratio of 1.53, indicating ample liquidity. Free cash flow over the trailing twelve months was $681.8 million, providing strong internal funding for operations and dividends. ROE stands at 18.2%, reflecting efficient capital use.
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 primary valuation metric is the P/E ratio. The trailing P/E is 22.44x, while the forward P/E is 14.89x, implying the market expects earnings growth in the coming year. The gap between trailing and forward P/E suggests optimism about a rebound in earnings. Compared to the industry average (Financial - Capital Markets), the stock's trailing P/E of 22.44x is at a premium to the sector median of approximately 15x, reflecting a 50% premium. This premium may be justified by Houlihan Lokey's strong brand and recurring restructuring revenue, but it also prices in a recovery that has yet to materialize. Historically, the stock's trailing P/E has ranged from 9.7x to 30.7x over the past five years. The current 22.44x is above the midpoint of that range, indicating the market is pricing in above-average expectations. If earnings fail to recover, the multiple could contract toward historical lows.
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
Financial & Operational Risks: HLI's revenue is highly cyclical, with Q4 FY2026 revenue down 4.6% YoY, and the Corporate Finance segment (68% of revenue) directly tied to M&A volumes. Operating margin declined from 24.9% to 22.5% sequentially, suggesting cost inflexibility. While debt is low (D/E 0.21), a prolonged downturn could pressure free cash flow ($681.8M TTM) and force dividend cuts (payout ratio 40.9%). The net margin of 15.7% is respectable but could compress if revenue falls further.
Market & Competitive Risks: HLI trades at a 50% premium to the sector median P/E, making it vulnerable to valuation compression if the recovery disappoints. With a beta of 0.96, it moves in line with the market, but its relative strength over the past year is -45.4% vs. the S&P 500, indicating severe underperformance. The stock is near its 52-week low, and a break below $130.72 could trigger stop-loss selling. No recent news highlights specific competitive threats, but larger banks like Goldman Sachs and Morgan Stanley compete for M&A mandates.
Worst-Case Scenario: If M&A activity remains depressed through 2026 and earnings fail to recover, the forward P/E could contract toward 12x (historical low). Applying 12x to estimated EPS of $10.52 gives a target of $126, below the 52-week low of $130.72. In this scenario, an investor could lose approximately 10% from the current price of $140.23, with a realistic downside to $126 (a -10.1% decline). However, if the economy enters a recession, the stock could fall to $100, representing a -28.7% loss.