The past six months haven’t been great for Houlihan Lokey. It just made a new 52-week low of $138.05, and shareholders have lost 32.7% of their capital. This may have investors wondering how to approach the situation.
Given the weaker price action, is now a good time to buy HLI? Find out in our full research report, it’s free.
Why Are We Positive On HLI?
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.
1. Skyrocketing Revenue Shows Strong Momentum
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years.
Over the last five years, Houlihan Lokey grew its revenue at an impressive 14.8% compounded annual growth rate. Its growth beat the average financials company and shows its offerings resonate with customers.
2. EPS Increasing Steadily
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated 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.
3. Growing TBVPS Reflects Strong Asset Base
We consider tangible book value per share (TBVPS) an important metric for financial firms. TBVPS represents the real, liquid net worth per share of a company, excluding intangible assets that have debatable value upon liquidation.
Houlihan Lokey’s TBVPS increased by 10.2% annually over the last five years, and growth has recently accelerated as TBVPS grew at an incredible 34.3% annual clip over the past two years (from $6.37 to $11.50 per share).
Final Judgment
These are just a few reasons why Houlihan Lokey is a cream-of-the-crop financials company. After the recent drawdown, the stock trades at 16.8× forward P/E (or $138.05 per share). Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
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