Houlihan Lokey
HLI
$139.34
+1.43%
Houlihan Lokey, Inc. is a global independent investment bank operating across three segments — Corporate Finance (M&A and capital markets advisory), Financial Restructuring (one of the largest and most recognized restructuring practices in the world), and Financial and Valuation Advisory (valuation opinions, fairness opinions, and strategic consulting) — serving corporations, institutions, and governments from offices in the U.S., Europe, and Asia-Pacific. The firm's distinctive identity rests on its counter-cyclical restructuring franchise, which historically cushions results when M&A volumes soften, paired with a mid-market M&A advisory leadership position that gives it a differentiated, less balance-sheet-intensive model than bulge-bracket peers. The current investor narrative is dominated by a sharp deceleration in deal activity: the most recent quarter (period ended June 30, 2026) showed revenue of $511 million, down 15.6% year-over-year, and the stock has fallen roughly 31% over the past year, with the July 30, 2026 earnings release triggering a one-day drop from $139.08 to $128.34. Debate now centers on whether the M&A trough is near and whether restructuring and valuation advisory can offset corporate finance weakness, with sell-side firms holding their ratings but trimming targets into a softer transaction environment.…
HLI
Houlihan Lokey
$139.34
Investment Opinion: Should I buy HLI Today?
Rating: Hold. The core thesis is that HLI is a high-quality franchise trading at a reasonable but not deeply discounted valuation amid a cyclical trough, with the analyst consensus 'buy' rating and average target of $155.44 (+20.0% upside) suggesting the sell-off is overdone, but the lack of a near-term catalyst and negative momentum argue for patience. The stock's 22.44x trailing PE and 15.08x forward PE reflect a market expecting an EPS rebound, and the 3.65x PS and 14.65x EV/EBITDA are elevated for a down-cycle advisory firm, so the risk/reward is balanced rather than compelling.
Supporting evidence for a constructive view includes the pristine balance sheet (debt-to-equity 0.21, $749 million cash), the counter-cyclical restructuring franchise ($119 million in Q1 revenue), and the 18.17% ROE, which remains healthy for the industry. The 1.82% dividend yield with a 40.9% payout ratio is well covered, and TTM free cash flow of $484.6 million demonstrates the business's cash-generative nature despite the negative quarterly print. However, revenue is contracting 15.6% YoY, operating margins have compressed to 15.26%, and the stock has underperformed the S&P 500 by 46.8 percentage points over twelve months, so the fundamental momentum is clearly negative.
The biggest risks that could invalidate the thesis are a further deterioration in M&A volumes, continued margin compression, and a break below the $112.83 52-week low. This Hold would upgrade to Buy if revenue growth stabilizes or turns positive and operating margins recover above 20%, or if the stock approaches the $112.83 low with signs of capitulation. It would downgrade to Sell if revenue declines accelerate beyond 20% or if operating margins fall below 12%. Relative to its history, HLI is fairly valued to slightly undervalued at 22.4x trailing PE versus a 19x–31x band, but relative to peers in a down-cycle, the premium is not obviously justified.
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HLI 12-Month Price Forecast
The risk/reward for HLI is balanced at current levels. The stock has de-rated significantly, trading at 22.4x trailing PE versus a historical 19x–31x band, and the forward multiple of 15.1x suggests the market is already pricing a recovery. However, the fundamental momentum is negative with revenue down 15.6% and margins compressing, and the technical picture shows persistent distribution with the stock in the bottom fifth of its 52-week range. The analyst consensus remains constructive, but targets may not have fully reset if deal activity deteriorates further. I would upgrade to bullish if revenue growth stabilizes or turns positive and operating margins recover above 20%, and downgrade to bearish if revenue declines accelerate beyond 20% or the stock breaks below $112.83.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Houlihan Lokey's 12-month outlook, with a consensus price target around $160.00 and implied upside of +14.8% versus the current price.
Average Target
$160.00
0 analysts
Implied Upside
+14.8%
vs. current price
Analyst Count
—
covering this stock
Price Range
$150 - $175
Analyst target range
Nine analysts cover HLI with a consensus recommendation of "buy" (mean rating 2.18 on a scale where lower is more bullish), and the average target price of $155.44 implies +20.0% upside from the current $129.55. The distribution skews constructive — recent institutional ratings include Outperform at BMO Capital (Aug 3, 2026), Outperform at Keefe Bruyette & Woods, Overweight at Morgan Stanley, Buy at Goldman Sachs, and Neutral at UBS — with no downgrades in the visible ratings history, suggesting analysts view the sell-off as a cyclical trough rather than a structural deterioration. Consensus FY EPS of $9.43 and revenue of $3.33 billion (range $3.08–$3.48 billion) imply expectations of a recovery from the current run-rate, which is the key assumption embedded in the bullish consensus.
The target range of $147 to $175 is moderately wide (a $28 spread, or roughly 19% of the average target), signaling meaningful uncertainty about the timing and magnitude of the M&A recovery. The high target of $175 (+35% upside) likely assumes a sharp rebound in corporate finance volumes, margin recovery toward the mid-20s, and multiple expansion back toward the high end of the historical band; the low target of $147 (+13.5%) still implies upside but prices in a slower, restructuring-led recovery with continued margin pressure. Notably, even the low target sits above the current price, indicating that the sell-side sees the stock as oversold — but the absence of any target below $147 also raises the risk that estimates have not fully reset if deal activity deteriorates further. With 9 analysts and a $8.9–9.6 billion market cap, coverage is adequate but not deep, and the tight clustering of targets above the market price should be treated as a sentiment signal rather than a precise valuation anchor.
Bulls vs Bears: HLI Investment Factors
The bear case currently has stronger near-term evidence: revenue is contracting 15.6% YoY, operating margins have compressed to 15.3% from the mid-20s, and the stock has underperformed the S&P 500 by 46.8 percentage points over twelve months. However, the bull case rests on a credible forward-looking argument — the 33% gap between trailing (22.4x) and forward (15.1x) PE implies the market expects an EPS rebound, and all nine analysts maintain buy ratings with targets 13.5%–35% above the current price. The single most important tension is whether the M&A trough is near: if deal volumes stabilize, the forward multiple looks reasonable and the stock re-rates; if they deteriorate further, the trailing 22.4x is not cheap for a business with declining revenue and the stock could retest its $112.83 low.
Bullish
- Analyst consensus sees 20% upside: All nine covering analysts rate HLI a buy (mean rating 2.18) with an average target of $155.44, implying +20.0% upside from $129.55. Even the lowest target of $147 sits 13.5% above the current price, suggesting the sell-side views the sell-off as a cyclical trough rather than structural deterioration.
- Forward PE compression signals recovery: The stock trades at 22.44x trailing earnings but only 15.08x forward earnings, a 33% compression that implies the market expects a meaningful EPS rebound. Consensus FY EPS of $9.43 versus the current annualized run-rate of roughly $4.68 (Q1 EPS of $1.17 annualized) suggests analysts anticipate a sharp recovery in deal activity.
- Counter-cyclical restructuring franchise: Financial Restructuring contributed $119 million in the most recent quarter, providing a buffer as Corporate Finance revenue fell to $303 million. This counter-cyclical segment historically cushions results when M&A volumes soften, giving HLI a differentiated earnings profile versus bulge-bracket peers.
- Pristine balance sheet with ample liquidity: Debt-to-equity is just 0.21, the current ratio is 1.53, and cash stood at $749 million at quarter-end. This negligible leverage and strong liquidity position means HLI can weather a prolonged deal drought without diluting shareholders or cutting its 1.82% dividend, which is well covered at a 40.9% payout ratio.
Bearish
- Revenue contracting 15.6% year-over-year: Q1 FY2027 revenue of $511 million fell 15.59% from $605.35 million a year ago, and was well below the $635.6 million and $717.1 million reported in the two preceding quarters. The sequential and YoY deterioration is broad-based, with Corporate Finance — the largest segment at $303 million — clearly the drag as M&A volumes normalize.
- Operating margin compression from deleverage: Operating margin has slipped to 15.26% from the 22.5%–24.9% range seen in FY2026 quarters, while EBITDA fell to $86 million (16.8% margin) from $144.2 million (23.8% margin) a year ago. The cost base is not flexing fast enough, and the investment case hinges on whether management can right-size compensation before margins erode further.
- Negative quarterly free cash flow: Q1 FY2027 operating cash flow was -$336 million and free cash flow -$342 million, driven by a -$477 million working capital swing typical of bonus and receivable timing. While TTM FCF of $484.6 million remains positive, the negative quarterly print is a reminder that cash flow in this model is seasonal and lumpy.
- Severe relative underperformance versus market: HLI is down 31.26% over the past year and 26.53% YTD, dramatically underperforming the S&P 500's +15.53% and +11.93% returns — a relative strength gap of -46.79 percentage points over twelve months. The stock sits 36.6% below its 52-week high of $204.18, signaling persistent distribution and a market unwilling to underwrite a near-term recovery.
HLI Technical Analysis
Houlihan Lokey is in a sustained, well-defined downtrend, with the stock down 31.26% over the past year and 26.53% year-to-date, dramatically underperforming the S&P 500's +15.53% one-year and +11.93% YTD returns — a relative strength gap of -46.79 percentage points over twelve months. At $129.55, the stock sits at just 18.2% of its 52-week range of $112.83 to $204.18, meaning it is trading in the bottom fifth of its annual band and roughly 36.6% below the 52-week high. This positioning signals persistent distribution and a market unwilling to underwrite a near-term recovery; the stock is closer to "falling knife" territory than a confirmed value opportunity, though the proximity to the 52-week low creates a defined risk point for contrarian positioning.
Short-term momentum remains negative but is decelerating in severity: the stock is down 0.61% over the past month and 7.47% over three months, a marked improvement from the 20.28% six-month decline, suggesting the pace of selling is moderating even as no durable uptrend has formed. The one-month relative strength of -1.83 points versus SPY's +1.22% shows HLI still lagging a rising market, a bearish divergence that argues against calling a bottom. The most violent leg lower occurred around the July 30 earnings release, when the stock gapped from $139.08 to $128.34 (-7.7%) and then to $125.49 the following session; since then, price has chopped in a $123–$137 range, with the October 14 close of $124.78 retesting the lower bound before a bounce to $129.55. Volume of roughly 670,000 shares is unremarkable, offering no capitulation signature that typically marks durable lows.
Key technical levels are clearly defined: support sits at the 52-week low of $112.83, roughly 12.9% below the current price, while resistance is anchored at the $137–$143 zone (the August–September swing highs) and, more distantly, the $204.18 52-week high. A decisive break below $123–$125 would confirm a fresh leg down and likely target the $112.83 low, whereas reclaiming $137 would break the sequence of lower highs and open a path toward the $150s. With a beta of 1.006, HLI's volatility is essentially in line with the market, so the -41.02% maximum drawdown reflects stock-specific de-rating rather than leverage to market beta — position sizing should focus on idiosyncratic deal-cycle risk rather than broad market hedging.
Beta
1.01
1.01x market volatility
Max Drawdown
-40.2%
Largest decline past year
52-Week Range
$113-$202
Price range past year
Annual Return
-29.8%
Cumulative gain past year
| Period | HLI Return | S&P 500 |
|---|---|---|
| 1m | +9.3% | +0.7% |
| 3m | +11.0% | +3.0% |
| 6m | -9.0% | +6.8% |
| 1y | -29.8% | +11.9% |
| ytd | -21.0% | +12.8% |
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HLI Fundamental Analysis
Revenue is contracting sharply: the most recent quarter (ended June 30, 2026) posted $511 million, down 15.59% year-over-year from $605.35 million in the prior-year Q1, and well below the $635.6 million and $717.1 million reported in the two preceding quarters. The sequential and YoY deterioration is broad-based within the mix — Corporate Finance contributed $303 million, Financial Restructuring $119 million, and Financial and Valuation Advisory $89 million — with the corporate finance engine, historically the largest segment, clearly the drag as M&A volumes normalize. This is a cyclical air-pocket rather than a structural break, but the magnitude of the decline (revenue down ~$94 million YoY) implies meaningful operating deleverage ahead and challenges the growth-premium narrative that supported the stock near $204.
Profitability remains solid in absolute terms but is compressing: Q1 FY2027 net income was $78 million with a 15.26% net margin, down from $97.5 million and a 16.11% net margin in the prior-year quarter, while operating income fell to $78 million (15.26% operating margin) from $89.8 million. The reported gross margin of 98.37% reflects the firm's cost-of-revenue accounting convention (compensation is largely booked in operating expenses), so the more meaningful profitability gauge is the operating margin, which has slipped from the 22.5%–24.9% range seen in FY2026 quarters to 15.3% — a clear sign of revenue deleverage. EBITDA of $86 million (16.8% margin) versus $144.2 million (23.8% margin) a year ago underscores that the cost base is not flexing fast enough; the investment case hinges on whether management can right-size compensation and non-comp expenses before margins erode further.
Balance-sheet health is a relative bright spot: debt-to-equity is just 0.21, the current ratio is 1.53, and cash stood at $749 million at quarter-end, giving the firm ample liquidity and negligible leverage risk. However, cash generation has become lumpy and working-capital-driven — Q1 FY2027 operating cash flow was -$336 million and free cash flow -$342 million, driven by a -$477 million working capital swing (typical of bonus and receivable timing in advisory businesses), versus TTM free cash flow of $484.6 million. ROE of 18.17% and ROA of 11.17% remain healthy for the industry, and the 1.82% dividend yield with a 40.9% payout ratio is well covered, but investors should watch the negative quarterly FCF print as a reminder that cash flow in this model is seasonal and not a clean read on earnings quality.
Quarterly Revenue
$511000000.0B
2026-06
Revenue YoY Growth
-15.6%
YoY Comparison
Gross Margin
30.7%
Latest Quarter
Free Cash Flow
$484634000.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is HLI Overvalued?
Because Houlihan Lokey is solidly profitable (Q1 FY2027 net income of $78 million; TTM net margin 16.26%), the PE ratio is the appropriate primary metric. The stock trades at 22.44x trailing earnings but only 15.08x forward earnings — a 33% compression that implies the market expects a meaningful EPS rebound, consistent with consensus FY estimates of $9.43 (range $8.70–$10.24) against a current annualized run-rate well below that. The gap between trailing and forward multiples is the crux of the debate: if the deal cycle recovers, the forward multiple looks reasonable; if it doesn't, the trailing 22.4x is not cheap for a business with declining revenue.
On other metrics, HLI trades at 3.65x sales, 4.08x book, 14.65x EV/EBITDA, and 13.57x price-to-cash-flow, with a PEG of 4.26 that flags the stock as expensive relative to its growth trajectory. The 3.50x EV/Sales and 14.6x EV/EBITDA are elevated for an advisory firm in a down-cycle, reflecting the market's willingness to pay for the restructuring franchise and mid-market M&A franchise quality. Without a direct industry-average benchmark in the provided data, the most telling comparison is internal: the stock's own historical PE band has ranged roughly 19x–31x over the past several years, and at 22.4x trailing it sits in the lower-middle of that range — not a deep-value discount, but no longer at the premium multiples (28x–31x) seen in 2025.
Historical context reinforces the de-rating story: HLI's PE was 28.7x in the June 2026 quarter, 24.9x in December 2025, and 30.7x in September 2025, versus 22.4x today, while PS has fallen from 20.8x (September 2025) to 3.65x on the current data set. The stock is near the bottom of its own multi-year valuation band, which historically has marked attractive entry points — but the compression is partly justified by the 15.6% revenue decline and margin compression, so the multiple is not obviously mispriced. A re-rating requires evidence of stabilizing M&A volumes; absent that, the stock can remain "cheap" for an extended period.
PE
22.4x
Latest Quarter
vs. Historical
Low-End
5-Year PE Range 19x~31x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
14.6x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks center on the sharp revenue contraction and margin deleverage. Q1 FY2027 revenue of $511 million fell 15.59% YoY, and operating margin compressed to 15.26% from the 22.5%–24.9% range seen in FY2026 quarters, while EBITDA fell to $86 million (16.8% margin) from $144.2 million (23.8% margin). The cost base is not flexing fast enough, and Q1 FY2027 operating cash flow was -$336 million with free cash flow of -$342 million, driven by a -$477 million working capital swing. Revenue concentration in Corporate Finance ($303 million of $511 million) means the M&A cycle is the dominant earnings driver, and the 15.6% decline implies meaningful further operating deleverage if volumes do not recover. Balance-sheet risk is minimal with debt-to-equity of 0.21 and $749 million in cash, but the 40.9% dividend payout ratio could come under pressure if earnings continue to decline.
Market and competitive risks include valuation compression and sector rotation. At 22.44x trailing PE, HLI sits in the lower-middle of its historical 19x–31x band, but the PEG of 4.26 and 3.65x PS are elevated for an advisory firm in a down-cycle, leaving room for further multiple compression if growth disappoints. The stock's beta of 1.006 means it is essentially in line with the market, so the -41.02% maximum drawdown reflects stock-specific de-rating rather than leverage to market beta. Competitive disruption from boutique advisory firms and the potential for bulge-bracket banks to regain mid-market share could pressure HLI's franchise, while regulatory headwinds around M&A antitrust scrutiny could delay deal closings. The absence of recent news limits visibility, but the July 30, 2026 earnings release triggered a one-day 7.7% drop, highlighting sensitivity to quarterly results.
Worst-case scenario: a prolonged M&A drought extends through FY2027, causing revenue to decline another 10%–15% and operating margins to fall below 12%, forcing consensus EPS estimates of $9.43 to be cut by 20%–30%. In this scenario, the stock could retest its 52-week low of $112.83, representing a -12.9% decline from the current $129.55, and if the low breaks, the next support is not clearly defined, with the -41.02% maximum drawdown implying a potential drop to roughly $76 from the 52-week high of $204.18. A more realistic bear case aligns with the analyst low target of $147, but that target may not fully reflect a further deterioration in deal activity, so investors should be prepared for a -13% to -20% downside from current levels in an adverse scenario.
FAQ
The key risks of holding HLI are, in order of severity: (1) a prolonged M&A drought that extends revenue declines beyond the current 15.6% YoY drop, potentially forcing consensus EPS estimates of $9.43 to be cut by 20%–30%; (2) continued margin compression, with operating margins already down to 15.26% from the mid-20s, and the risk of falling below 12% if cost cuts lag revenue declines; (3) a break below the $112.83 52-week low, which would trigger technical selling and potentially test the -41.02% maximum drawdown level; and (4) competitive pressure from boutique advisory firms and bulge-bracket banks regaining mid-market share. The balance sheet is a mitigant, with debt-to-equity of 0.21 and $749 million in cash, but the negative quarterly free cash flow of -$342 million highlights the seasonal and lumpy nature of cash generation.
The 12-month forecast for HLI is neutral with a slight upward bias, based on three scenarios: a 25% probability bull case with a target range of $155–$175 (driven by an M&A recovery and margin expansion), a 50% probability base case with a target range of $140–$155 (assuming stabilization but no meaningful recovery), and a 25% probability bear case with a target range of $112–$130 (assuming a prolonged drought and estimate cuts). The base case is most likely, with the key assumption that Corporate Finance revenue stabilizes around $300–$320 million per quarter and operating margins hold in the 15%–18% range. The average analyst target of $155.44 aligns with the upper end of the base case and the lower end of the bull case, suggesting modest upside from current levels.
HLI appears fairly valued to slightly undervalued relative to its own history but expensive relative to its current growth trajectory. The stock trades at 22.44x trailing PE, which is in the lower-middle of its historical 19x–31x band, and at 15.08x forward PE, implying a 33% compression that suggests the market expects an EPS rebound. However, the PEG ratio of 4.26 and 3.65x PS are elevated for an advisory firm in a down-cycle, and the 14.65x EV/EBITDA is not cheap. The market is paying a premium for the restructuring franchise and mid-market M&A quality, but the valuation implies the market expects a recovery in deal activity. If that recovery does not materialize, the stock could remain 'cheap' for an extended period or de-rate further.
HLI is a good buy for long-term value investors with a tolerance for near-term volatility, but it is not a compelling buy at current levels for short-term traders. The stock trades at 22.44x trailing earnings and 15.08x forward earnings, with a 20.0% upside to the average analyst target of $155.44, and all nine analysts rate it a buy. However, revenue is contracting 15.6% YoY, operating margins have compressed to 15.26%, and the stock is in a well-defined downtrend, down 31.26% over the past year. The biggest downside risk is a break below the $112.83 52-week low, which would represent a -12.9% decline from the current price. For investors with a 2–3 year horizon who believe the M&A cycle will recover, the risk/reward is favorable, but for those seeking near-term gains, the lack of a catalyst and negative momentum argue for waiting for a better entry point.
HLI is more suitable for long-term investment than short-term trading. The stock's beta of 1.006 means it is not excessively volatile relative to the market, but the -41.02% maximum drawdown and the 31.26% one-year decline reflect stock-specific de-rating that could take time to reverse. The 1.82% dividend yield and 40.9% payout ratio provide some income, and the pristine balance sheet reduces financial risk, making it a suitable holding for a 2–3 year horizon. Short-term traders should note the lack of a near-term catalyst and the negative momentum, with the stock in the bottom fifth of its 52-week range. A suggested minimum holding period is 18–24 months to allow for the M&A cycle to recover and for the valuation to re-rate toward the analyst target.