HOULIHAN LOKEY, INC. (HLI) Stock Analysis
HOULIHAN LOKEY, INC. (HLI) Stock Analysis
Overall Grade: F (Concerning)
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HOULIHAN LOKEY, INC. faces challenges in financial performance that warrant careful analysis.
Key Metrics:
| Metric | Value | Context |
|---|---|---|
| ROIC | -46.3% | Below expectations |
| FCF Margin | 30.5% | Strong cash generation |
Investment Thesis: Healthy free cash flow margin of 30.5% provides financial flexibility for growth and shareholder returns.
What is HOULIHAN LOKEY, INC.'s Profitability and ROIC?
HOULIHAN LOKEY, INC.'s return on invested capital of -46.3% is below the typical cost of capital. Gross margin of 32.6% with operating margin at 20.1% reflects the company's moderate market position.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Return on Invested Capital (ROIC) | -46.3% | Red flag | Below cost of capital |
| Gross Margin | 32.6% | Good | Competitive pricing environment |
| Operating Margin | 20.1% | Excellent | Efficient operations |
How Strong is HOULIHAN LOKEY, INC.'s Cash Flow Quality?
HOULIHAN LOKEY, INC. generated $783.6M in free cash flow over the trailing twelve months, representing a 30.5% margin. Cash earnings quality is strong, with operating cash flow exceeding net income by 1.9x.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Free Cash Flow Margin | 30.5% | Excellent | Excellent cash conversion |
| Free Cash Flow (TTM) | $783.6M | Good | Positive cash generation |
| OCF/Net Income | 1.9x | Excellent | High earnings quality |
| FCF Consistency (8Q) | N/A | Warning | Variable cash flow |
What is HOULIHAN LOKEY, INC.'s Financial Health?
Is HOULIHAN LOKEY, INC. Stock Overvalued or Undervalued?
HOULIHAN LOKEY, INC. trades at a P/E of 31.9x, representing a premium to the sector median of N/A. Free cash flow yield of 5.8% offers attractive cash returns.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| P/E Ratio | 31.9x | Adequate | Premium valuation |
| EV/Sales | -0.3x | Excellent | Attractive revenue multiple |
| FCF Yield | 5.8% | Good | Attractive cash return |
Sector Rankings
| Metric | Value | Percentile | vs Median |
|---|---|---|---|
| Return on Invested Capital (ROIC) | -46.3% | Bottom 10% | -5.0x below |
| Free Cash Flow Margin | 30.5% | Top 50% | 1.4x above |
| Gross Margin | 32.6% | Bottom 10% | 0.3x below |
| Operating Margin | 20.1% | Bottom 50% | 0.7x below |
| P/E Ratio | 31.9x | N/A | - |
Rating Thresholds
Return on Invested Capital (ROIC)
Measures how efficiently a company uses its debt and equity capital to generate profits. ROIC above 15% typically indicates a competitive moat.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Exceptional capital efficiency, strong competitive moat |
| Good | 12% - 20% | Above-average returns, sustainable competitive position |
| Adequate | 8% - 12% | Around cost of capital, moderate competitive position |
| Warning | 4% - 8% | Below cost of capital, value may be eroding |
| Red flag | < 4% | Significant capital destruction, fundamental issues |
Current: -46.3% (Red flag)
Free Cash Flow Margin
The percentage of revenue converted to free cash flow. Higher margins indicate stronger cash generation and business quality.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Strong cash generation, high-quality business |
| Good | 10% - 20% | Healthy cash conversion |
| Adequate | 5% - 10% | Moderate cash generation |
| Warning | 0% - 5% | Thin cash margins, capital intensive |
| Red flag | < 0% | Cash burn, potential liquidity concerns |
Current: 30.5% (Excellent - Top 50% of sector (median: 22.2%))
Gross Margin
Revenue minus cost of goods sold as a percentage. Higher gross margins indicate pricing power and competitive advantage.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 50% | Strong pricing power and competitive moat |
| Good | 30% - 50% | Healthy margins, differentiated product |
| Adequate | 20% - 30% | Moderate margins, competitive industry |
| Warning | 10% - 20% | Thin margins, commodity-like business |
| Red flag | < 10% | Very thin margins, structural challenges |
Current: 32.6% (Good - Bottom 10% of sector (median: 100.0%))
P/E Ratio (Price-to-Earnings)
Stock price divided by earnings per share. Lower P/E may indicate undervaluation, while higher P/E suggests growth expectations.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | < 15x | Attractively valued, potential opportunity |
| Good | 15x - 25x | Fair value for quality company |
| Adequate | 25x - 35x | Growth premium, justify with earnings growth |
| Warning | 35x - 50x | High expectations priced in |
| Red flag | > 50x or negative | Speculative valuation or losses |
Current: 31.9x (Adequate)
Free Cash Flow Yield
Free cash flow per share divided by stock price. Higher FCF yield indicates better cash return relative to valuation.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 8% | High cash return, potential value opportunity |
| Good | 5% - 8% | Solid cash yield |
| Adequate | 3% - 5% | Moderate cash return |
| Warning | 1% - 3% | Low cash yield, growth expectations |
| Red flag | < 1% | Minimal cash return to shareholders |
Current: 5.8% (Good)
Frequently Asked Questions
Q: What is HOULIHAN LOKEY, INC.'s Return on Invested Capital (ROIC)?
HOULIHAN LOKEY, INC. (HLI) has a trailing twelve-month Return on Invested Capital (ROIC) of -46.3%. This compares below the sector median of 9.2%. An ROIC below 8% suggests the company may be destroying shareholder value.
Q: What is HOULIHAN LOKEY, INC.'s Free Cash Flow Margin?
HOULIHAN LOKEY, INC. (HLI) has a free cash flow margin of 30.5%, generating $783.6 million in free cash flow over the trailing twelve months. A FCF margin above 20% indicates excellent cash conversion and a high-quality business model.
Q: Is HOULIHAN LOKEY, INC. stock overvalued or undervalued?
HOULIHAN LOKEY, INC. (HLI) trades at a P/E ratio of 31.9x, which is above the sector median of N/A. The EV/Sales multiple is -0.3x. Free cash flow yield is 5.8%, which is in line with market averages.
Q: What is HOULIHAN LOKEY, INC.'s revenue and earnings growth?
HOULIHAN LOKEY, INC. (HLI) grew revenue by 21.0% year-over-year. Earnings per share increased by 27.0% compared to the prior year. Double-digit revenue growth indicates strong demand and market share gains.
Q: How does HOULIHAN LOKEY, INC. compare to competitors in Financials?
Compared to other companies in Financials, HOULIHAN LOKEY, INC. (HLI) shows: ROIC of -46.3% is below the sector median of 9.2% (-5.0x median). FCF margin of 30.5% exceeds the sector median of 22.2% (Top 32% of sector). Gross margin at 32.6% is 67.4 percentage points lower than sector peers. These rankings are based on MetricDuck's analysis of all Financials companies with available SEC filings.
Q: What warning signs should I watch for with HOULIHAN LOKEY, INC.?
HOULIHAN LOKEY, INC. (HLI) shows no major financial warning signs based on current metrics. However, investors should always monitor: 1) Margin compression trends, 2) Cash flow consistency, 3) Debt levels relative to cash generation, and 4) Changes in competitive positioning.
Data Source: Data sourced from 10-Q filed 2025-11-04. TTM metrics as of Q3 2025.
Methodology: Financial metrics calculated from SEC 10-K and 10-Q filings using standardized formulas. Sector comparisons use peer group based on SIC code.
This analysis is for informational purposes only and does not constitute investment advice.