Intrinsic Value Houlihan Lokey, Inc. (HLI)

• Previous Close: $205.19
• Intrinsic Value: $184.05
• Upside potential: -10%

Stock Valuation Context

Business Model And Market Position

Houlihan Lokey, Inc. operates as a leading global investment bank specializing in mergers and acquisitions, capital markets, restructuring, and financial advisory services. The firm serves corporations, institutions, and governments across industries such as technology, healthcare, industrials, and consumer markets. Its revenue model is primarily fee-based, driven by transaction advisory, valuation opinions, and fairness opinions, positioning it as a trusted advisor in mid-market and large-scale deals. The company differentiates itself through deep sector expertise, a conflict-free advisory approach, and a reputation for high-touch client service. With a global footprint, Houlihan Lokey competes with bulge-bracket banks while maintaining agility and specialized focus, particularly in restructuring and financial sponsor coverage. Its market position is reinforced by consistent deal flow and a strong track record in complex transactions, making it a preferred partner for clients navigating strategic financial decisions.

Revenue Profitability And Efficiency

Houlihan Lokey reported revenue of $2.39 billion for FY 2025, with net income of $399.7 million, reflecting a robust margin of approximately 16.7%. Diluted EPS stood at $5.82, demonstrating efficient earnings conversion. Operating cash flow was strong at $848.6 million, supported by high-margin advisory services. Capital expenditures were modest at -$39.7 million, indicating a capital-light business model with scalable operations.

Earnings Power And Capital Efficiency

The company’s earnings power is underscored by its ability to generate consistent cash flows from high-value advisory services. With a capital-efficient structure, Houlihan Lokey maintains low reinvestment needs, allowing for significant free cash flow generation. The firm’s focus on high-return advisory work and disciplined cost management enhances its return on invested capital, positioning it well for sustained profitability.

Balance Sheet And Financial Health

Houlihan Lokey’s balance sheet remains solid, with $971.0 million in cash and equivalents and total debt of $438.2 million, reflecting a conservative leverage profile. The firm’s liquidity position supports operational flexibility and potential strategic initiatives. Shareholders’ equity is robust, underpinned by retained earnings and a stable capital structure, ensuring financial resilience in varying market conditions.

Growth Trends And Dividend Policy

The company has demonstrated steady growth, driven by organic expansion and strategic hires in key sectors. Its dividend policy is shareholder-friendly, with a dividend per share of $2.28, reflecting a commitment to returning capital while retaining sufficient funds for growth investments. Houlihan Lokey’s ability to capitalize on market cycles, particularly in restructuring, provides a countercyclical growth buffer.

Valuation And Market Expectations

Houlihan Lokey trades at a premium relative to peers, reflecting its strong market position and consistent execution. Investors likely price in its niche expertise and recurring revenue streams from long-term client relationships. The firm’s valuation multiples suggest confidence in its ability to maintain leadership in advisory services and capitalize on global M&A and restructuring trends.

Strategic Advantages And Outlook

Houlihan Lokey’s strategic advantages include its sector specialization, conflict-free advisory model, and global reach. The outlook remains positive, supported by sustained demand for corporate advisory services and restructuring expertise. The firm is well-positioned to navigate economic cycles, leveraging its reputation and talent base to capture growth opportunities in evolving markets.

Sources

10-K filing, company investor relations