Houlihan Lokey, Inc. (HLI): what the price requires

At today's price, Houlihan Lokey, Inc. (HLI) is priced for +8.9% earnings growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-19 · Source: https://boothcheck.com/report/HLI

Headline

FieldValue
TickerHLI
CompanyHoulihan Lokey, Inc.
Current price$132.58/sh
CompositionCorporate Finance 67% / Financial Restructuring 20% / Financial and Valuation Advisory 13%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basisfee-financial
Implied earnings growth8.9%
Price-to-earnings22.7x
Earnings yield4.4%

Solve inputs: computed at a 9.6% cost of equity with 4% terminal growth over a 5-year stage, on a 5-year median GAAP earnings base; each 1pp of cost of equity moves the implied earnings growth ~4.3pp.

How unusual the bet is: within-range

ReferenceValue
vs own history-0.57σ
cohort percentile (of 49 peers)55
implied end-window share0%

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset1.92x5expensive
Earnings1.72x5expensive
Relative1.49x4expensive
Growth0.73x3justifies

Families that justify the price: Growth Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.6%); the inversion above states its own rate.

Per-Model Detail (n=17)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$279.150.47xyesFCF base $0.7B, growth 10% (input: historical growth), terminal g 4.0%, WACC 8.6%, 6yr projection
DCF Exit MultipleGrowth$181.350.73xyesExit EV/EBITDA: 13.8x / 15.8x / 17.8x (bear / base = today's held flat / bull), 6yr
Relative ValuationRelative$101.461.31xyesP/E 14.79x (blended: static sector reference 12x + trailing (TTM) 21x), scenarios: 12.3x / 14.8x / 17.3x (bear / base = reference held flat / bull), EV/EBITDA N/Ax
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$67.261.97xyesBV/sh $34.23, ROE (TTM) 18.2%, ke 9.3%
Two-Stage Excess ReturnAsset$93.091.42xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$117.271.13xyesRev $2.6B, growth 10% (input: historical growth; tapered), Terminal P/S: 2.9x / 3.5x / 4.0x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$74.641.78xyesEPS $6.22, growth 9% (input: historical EPS growth), PEG=2.50 (Overvalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$59.122.24xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.47B × (1−27%) / WACC 8.6% → EPV (no growth)
Residual IncomeAsset$92.311.44xyesBV $34.23 + 5yr PV of (ROE (TTM) 18.2% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham NumberAsset$69.221.92xyes√(22.5 × EPS $6.22 × BVPS $34.23) — Graham's conservative floor
EV/EBITDA RelativeRelative——no—
FCF YieldEarnings$108.831.22xyesFCF $681.8M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$77.031.72xyesSBC-adj FCF $0.48B (FCF $0.68B − SBC $0.20B) capitalized at Kₑ
Ben Graham FormulaEarnings$133.021.00xyesEPS $6.22 × (8.5 + 2×8.5%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$15.998.29xyesBV $34.23 × (ROIC 4.0% / WACC 8.6%)
P/Sales SectorRelative$114.761.16xyesRevenue $2.62B × sector P/S 3.0x
PEG Fair ValueRelative$79.381.67xyesEPS $6.22 × (PEG 1.5 × growth 8.5% (input: historical EPS growth)) → PE 12.8x
Earnings YieldEarnings$67.241.97xyesEPS $6.22 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net cash$1.2b
Net debt / NOPAT (after-tax)-3.03x (net cash)
Net debt / operating income (pre-tax)-2.21x (net cash)
Share count CAGR (dilution)0.1%
Burning cashno

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

Bull Case

Houlihan Lokey sits at a mature, cash-generative stage where the question is not whether it grows but how steadily, and that stability is its strongest selling point. This is a capital-light advisory firm: it owns almost no hard assets, carries effectively no debt, and holds net cash of roughly $1.19 billion. The business converts banker talent and reputation into fees, and fiscal 2026 was a record year, with revenue of $2.62 billion, up 10% from the prior year's $2.39 billion. Both Corporate Finance and Financial and Valuation Advisory produced record segment revenues. A firm that grows its top line at a double-digit rate while needing no capital to do it is a compounding machine with very little to break.

The structural edge is the restructuring leg. Most M&A advisors are pure-play cyclicals: they feast when deals flow and starve when they stop. Houlihan Lokey built a Financial Restructuring practice that, per the firm's own description, provides advice to debtors and creditors precisely when the economy turns down and companies need to renegotiate their balance sheets. The segment had one of its strongest years on record in fiscal 2026, ending at $529 million in revenue. That counter-cyclicality smooths the earnings the M&A franchise cannot, and it is the reason the firm can keep raising its dividend across cycles.

Management is allocating capital like a confident steward. Fiscal 2026 included two completed acquisitions, a 16.7% dividend increase to $0.70 per share, and the firm flagged a record backlog and pipeline heading into fiscal 2027 with cautious optimism, especially in restructuring. The share count has barely moved, growing about 0.1% a year, so the per-share claim on those rising fees is not being diluted away. An investor here is buying a debt-free, dividend-growing advisory franchise with a built-in hedge against the very downturn that would sink its competitors.

Bear Case

The variable with the most leverage on Houlihan Lokey is one it does not control: the volume of corporate deals getting done. Advisory revenue is a function of transactions closing, and when M&A volumes decline or private-equity sponsors delay activity, the fees simply do not materialize. The firm is candid that for engagements that fall through, fees are generally limited to the fees paid at the time an engagement letter is signed plus any progress fees, meaning a stalled deal market converts pipeline into very little realized revenue. The firm even warns that its concentration leaves it more exposed to swings than other larger, more diversified competitors in the financial services industry, and that those swings can drive large moves in the stock.

That sensitivity already showed up in the most recent quarter. Fiscal fourth-quarter revenue of $635.6 million and EPS of $1.63 came in below the roughly $686 million and $1.84 consensus, a miss that landed even as the full year set a record. The restructuring segment, the supposed hedge, was down 3% for the year at $529 million, a reminder that the counter-cyclical leg is only counter-cyclical when there is a downturn to advise through; in a soft-but-not-broken market, neither engine runs flat out. The firm itself notes its revenue in any given period can be unpredictable, exposed even to catastrophes and disruptions outside its control.

The price is what turns these operational risks into an investment risk. At about 24 times earnings, the stock implies fee earnings growing roughly 10.7% a year for several years, and it sits in the upper half of comparable fee-financial firms on price-to-earnings. Among firms growing earnings that fast, only about half sustained the pace for five years. Only the forward-growth methods reach the current price; the asset-based, earnings-power, and peer-multiple lenses all read it as richly valued. The bear case is straightforward arithmetic on a cyclical input: the price pays a premium for durable double-digit compounding, and the engine that produces it runs on a deal cycle that has already shown it can disappoint.

Valuation

An advisory firm is worth the fees it earns, not the assets it owns, so the right lens is price-to-earnings rather than book value. On that lens Houlihan Lokey trades at about 24 times earnings, a 4.1% earnings yield, and that price embeds a specific bet: that the firm grows its fee earnings roughly 10.7% a year. Measured against its own record, that pace is within what it has delivered; record fiscal 2026 revenue of $2.62 billion grew 10% over the prior year. So the assumption is not heroic on rate. The stretch is durability, holding that growth across a deal cycle that swings.

The families of method tell a consistent story. Only the forward-growth approach reaches the current price; the asset-based, earnings-power, and peer-multiple lenses all sit below it. For a capital-light fee business that pattern is expected, because there is little asset value to anchor on and the premium is entirely a claim on the durability of the earnings stream. Relative to the fee-financial cohort, the stock sits in the upper half on price-to-earnings, so it is priced as a quality compounder rather than a bargain.

The balance sheet removes the usual financial risk from the equation, which sharpens what the bet actually is. The firm carries roughly $1.19 billion of net cash and no funded debt, so there is no leverage to amplify a downturn and no refinancing risk; interest coverage is not even a meaningful question here. That leaves the entire investment case resting on one thing: whether the deal and restructuring cycle lets the firm compound fee earnings at the pace the price assumes. The cash cushion bounds the downside, but it does not make the growth assumption any less the heart of the matter.

Catalysts

The fiscal 2026 results, reported at the firm's late-spring fiscal year-end, were a record-but-soft-finish story. Full-year revenue reached $2.62 billion, up 10%, with adjusted EPS of $6.22, and both Corporate Finance and Financial and Valuation Advisory set segment records. The fourth quarter, however, came in light: revenue of $635.6 million and EPS of $1.63 against consensus near $686 million and $1.84. Financial Restructuring ended the year at $529 million, down 3%, even after one of its strongest years on record.

The forward setup is about a deal-cycle recovery. Management pointed to a record backlog and pipeline, two completed acquisitions during the year, and a 16.7% dividend increase to $0.70 per share, while expressing cautious optimism for fiscal 2027 with particular emphasis on restructuring. The countervailing pressure is the macro backdrop: declining M&A volumes and delayed sponsor activity are the headwinds the firm named directly. The next several quarters are the test of whether the record backlog converts into closed transactions or whether sponsor hesitation keeps the largest segment from running at full pace. For a firm whose revenue depends on deals actually closing, backlog is a promise and the conversion is the catalyst.

Peer Cohorts (Per Segment, With Filing Citations)

Corporate Finance (reported)

Financial Restructuring (reported)

Financial and Valuation Advisory (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Q4 fiscal 2026 earnings call

View the full interactive HLI report on boothcheck