A Look At Houlihan Lokey (HLI) Valuation As Quarterly Revenue Misses Expectations But Segment Records Support Optimistic Outlook

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Quarterly results move into focus for Houlihan Lokey stock

Houlihan Lokey (HLI) has drawn fresh attention after reporting quarterly revenue that declined from a year earlier and came in below analyst expectations, with management attributing the shortfall mainly to deal timing and software sector volatility.

At the same time, the company highlighted record fourth quarter revenue in its Corporate Finance and Financial and Valuation Advisory segments. It also pointed to recent wins, acquisitions, and international expansion as key drivers behind its constructive outlook.

See our latest analysis for Houlihan Lokey.

At a share price of $149.66, Houlihan Lokey has seen the share price fall 7.0% over the past month and 15.1% year to date, while the 5 year total shareholder return of 122.5% suggests long term holders have still seen strong gains. Recent quarterly softness and mixed deal activity appear to have cooled momentum rather than reset the longer term story.

If this mix of deal cyclicality and long term value creation has you thinking about what else might be setting up for the next few years, it could be worth scanning resilient businesses beyond investment banking using a curated list of founder led companies via the 20 top founder-led companies

With the stock down double digits over the past year, solid multi year returns, and active buybacks on the table, is Houlihan Lokey quietly offering value today, or is the market already pricing in its future growth?

Most Popular Narrative: 14.2% Undervalued

The most followed narrative pegs Houlihan Lokey’s fair value at $174.50, comfortably above the last close at $149.66. This frames a clear valuation gap to investigate further.

Increasing global corporate complexity and cross-border transactions are driving ongoing demand for independent advisory expertise, as evidenced by resilient revenues and continued international hiring and expansion initiatives. These factors are expected to support sustained top-line revenue growth.

Read the complete narrative.

Want to see what is underpinning that fair value gap? The narrative leans on steady revenue growth, firmer margins, and a future earnings profile that assumes Houlihan Lokey keeps winning mandates at scale.

Result: Fair Value of $174.50 (UNDERVALUED)

Have a read of the narrative in full and understand what’s behind the forecasts.

However, there are still clear risks, including high compensation costs and dependence on U.S. deal activity, which could pressure margins and unsettle the current upside narrative.

Find out about the key risks to this Houlihan Lokey narrative.

Another View: Cash Flow Says The Stock Is Ahead Of Itself

While the popular narrative sees Houlihan Lokey trading about 14.2% below a fair value of $174.50, the SWS DCF model points the other way. On that cash flow view, the stock at $149.66 sits above an estimated value of $130.59, which implies it is overvalued. So which story do you trust more, the earnings based narrative or the cash flows?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Houlihan Lokey for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 51 high quality undervalued stocks. If you save a screener we even alert you when new companies match – so you never miss a potential opportunity.

Next Steps

This mix of optimism and caution sets the tone, so move quickly, review the underlying numbers yourself, and decide if the potential rewards stack up, starting with the 4 key rewards.

Looking for more investment ideas?

If Houlihan Lokey has caught your eye, do not stop there. Widen your watchlist now and give yourself more options before the next big move.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include HLI.

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