Houlihan Lokey (HLI)

Investment banking firm Houlihan Lokey (NYSE:HLI) beat Wall Street’s revenue expectations in Q4 CY2025, with sales up 13% year on year to $717.1 million. Its non-GAAP profit of $1.94 per share was 3.6% above analysts’ consensus estimates.

Company Overview

Founded in 1972 and known for its expertise in complex financial situations, Houlihan Lokey (NYSE:HLI) is a global investment bank specializing in mergers and acquisitions, capital markets, financial restructurings, and valuation advisory services.

Investment banks and brokerages facilitate capital raises, mergers and acquisitions, and securities trading. The sector benefits from corporate activity during economic expansion, increased retail trading participation, and advisory opportunities in emerging sectors. Headwinds include economic cycle vulnerability affecting deal flow, compressed trading commissions due to electronic platforms, and regulatory capital requirements constraining certain higher-risk activities.

Houlihan Lokey competes with other independent investment banks like Lazard (NYSE:LAZ), Evercore (NYSE:EVR), and PJT Partners (NYSE:PJT), as well as the investment banking divisions of larger financial institutions such as Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), and JPMorgan Chase (NYSE:JPM).

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Houlihan Lokey grew its revenue at an impressive 14.8% compounded annual growth rate. Its growth surpassed the average financials company and shows its offerings resonate with customers, a great starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Houlihan Lokey’s annualized revenue growth of 20% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Houlihan Lokey reported year-on-year revenue growth of 13%, and its $717.1 million of revenue exceeded Wall Street’s estimates by 2.7%.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For Investment Banking & Brokerage companies, we look at pre-tax profit rather than the operating margin that defines sectors such as consumer, tech, and industrials.

This is because for financials businesses, interest income and expense should be factored into the definition of profit but taxes - which are largely out of a company's control - should not.

Over the last five years, Houlihan Lokey’s pre-tax profit margin has risen by 3.8 percentage points, going from 28.4% to 21.8%. Luckily, it seems the company has recently taken steps to address its expense base as its pre-tax profit margin expanded by 2.6 percentage points on a two-year basis.

Houlihan Lokey’s pre-tax profit margin came in at 23.7% this quarter. This result was in line with the same quarter last year.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Houlihan Lokey’s solid 14.3% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

Houlihan Lokey’s two-year annual EPS growth of 34.9% was fantastic and topped its 20% two-year revenue growth.

We can take a deeper look into Houlihan Lokey’s earnings to better understand the drivers of its performance. While we mentioned earlier that Houlihan Lokey’s pre-tax profit margin was flat this quarter, a two-year view shows its margin has expanded. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q4, Houlihan Lokey reported adjusted EPS of $1.94, up from $1.64 in the same quarter last year. This print beat analysts’ estimates by 3.6%. Over the next 12 months, Wall Street expects Houlihan Lokey’s full-year EPS of $7.88 to grow 8%.

Return on equity, or ROE, quantifies bank profitability relative to shareholder equity - an essential capital source for these institutions. Over extended periods, superior ROE performance drives faster shareholder wealth compounding through reinvestment, share repurchases, and dividend growth.

Over the last five years, Houlihan Lokey has averaged an ROE of 21.3%, excellent for a company operating in a sector where the average shakes out around 10% and those putting up 25%+ are greatly admired. This shows Houlihan Lokey has a strong competitive moat.

The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.

If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.

Houlihan Lokey currently has $497.1 million of debt and $2.29 billion of shareholder's equity on its balance sheet, and over the past four quarters, has averaged a debt-to-equity ratio of 0.3×. We think this is safe and raises no red flags. In general, we’re comfortable with any ratio below 3.5× for a financials business.

It was encouraging to see Houlihan Lokey beat analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Overall, this print had some key positives. The stock remained flat at $180.54 immediately following the results.

Updated: January 28, 2026 at 11:40 PM EST

Before deciding whether to buy Houlihan Lokey or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

There are numerous reasons why we think Houlihan Lokey is one of the best financials companies out there. For starters, its revenue growth was impressive over the last five years. And while its declining pre-tax profit margin shows the business has become less efficient, its stellar ROE suggests it has been a well-run company historically. Additionally, Houlihan Lokey’s solid EPS growth over the last five years shows its profits are trickling down to shareholders.

Houlihan Lokey’s P/E ratio based on the next 12 months is 21.5x. Analyzing the financials landscape today, Houlihan Lokey’s positive attributes shine bright. We think it’s one of the best businesses in our coverage and like the stock at this price.

Wall Street analysts have a consensus one-year price target of $208.25 on the company (compared to the current share price of $180.54), implying they see 15.3% upside in buying Houlihan Lokey in the short term.