Summary: ON SALE
Score: 19/20
MOS: 66%
Share Price: $74
Sticker Price: $219
Is Houlihan Lokey stock a good buy?
Houlihan Lokey is a multinational independent investment bank and financial services company that was founded in 1972, headquartered in Los Angeles, CA, and has locations in London, Paris, Frankfurt, Hong Kong, Tokyo, and Beijing.
Houlihan Lokey has three major revenue streams.
- Corporate Finance. This includes mergers and acquisitions, capital markets, private fund advisory, and board advisory.
- Financial Restructuring. This includes company advisory and creditor advisory.
- Financial and Valuation Advisory. This includes portfolio valuation and fund advisory, transaction opinions, corporate valuation advisory services, transaction advisory services, real estate valuation and advisory, and dispute resolution consulting.
Houlihan Lokey is currently ranked #1 in announced M&A transactions for all U.S. transactions, #1 globally in restructuring, and the #1 M&A fairness opinion advisor over the past 20 years, according to Refinitiv (formerly Thomson Reuters).
Houlihan Lokey has avoided going toe-to-toe with Wall Street M&A firms and has focused more on mid-market transactions valued at $1B and below.
Some of Houlihan Lokey’s M&A deals include:
- Morgan Stanley acquisition of Eaton Vance
- Sandvik acquisition of CGTech
- Hershey acquisition of VMG
- Unilever acquisition of Smartypants
- McCormick acquisition of Catterton
Some of Houlihan Lokey’s other projects include:
- Swissport €2.4B debt restructuring
- Virgin Atlantic €170M debt and €200M equity financing as part of €1.2B financial restructure
- Skillsoft Chapter 11 Plan of Reorganization, restructuring €2.1B of debt and raising $110M.
- I3 divested its Hypersonics business to Lockheed Martin
Here is what the news has to say.
This article from Bloomberg Quint states that Houlihan Lokey has been moving into new areas including private equity fundraising advisory and technology banking. As stated by Scott Adelson, Houlihan’s co-president, “Be greedy when others are fearful is something we believe in.” In other words, it’s time to take action when others stand on the sidelines. This is very similar to the Stockpiling strategy promoted by Tykr.
This article from Yahoo Finance states that Houlihan Lokey had a record-breaking year for revenue (32% increase) and net income (51% increase). This is due M&A and business valuation services.
This article from INROADS talks about Houlihan Lokey’s strong focus on diversity. Studies have shown that only 4% of employees in financial services identify as diverse. In response to this statistic, Houlihan Lokey is partnering with INROADS to provide young people from diverse backgrounds with a pathway to identify, prepare for, and pursue fulfilling careers in the financial services industry.
This article from Americanbar.org states that Jennifer Muller, a Managing Director at Houlihan Lokey, received the inaugural women in M&A leadership award. The award recognizes women for the achievements, commitment, and leadership in the advancement of women and women’s issues in the field of mergers and acquisitions.
Here is how they stack up against the competition.
HLI (Houlihan Lokey)
Summary: On Sale
Score: 19/20
MOS: 66%
Revenue: $1.5B
EVR (Evercore)
Summary: Watch
Score: 16/20
MOS: 16%
Revenue: $2.9B
LAZ (Lazard)
Summary: Overpriced
Score: 9/20
MOS: 1%
Revenue: $2.8B
MC (Moelis & Co)
Summary: Watch
Score: 14/20
MOS: 1%
Revenue: $1.1B
PIPR (Piper Jaffray Companies)
Summary: On Sale
Score: 12/20
MOS: 70%
Revenue: $1.4B
The scores of some of the competitors look very strong. The only competitive MOS is from PIPR.
Now let’s take a look at the 4 M’s.
MOS (Margin of Safety): Tykr shows the financials are very strong. A score of 19/20 is very hard to achieve. This shows how well Houlihan Lokey is operating.
Meaning: Will mergers and acquisitions along with corporate financial services be around in 10 years? Absolutely! As businesses continue to grow and merge with other businesses, firms such as Houlihan Lokey will remain in demand.
Moat: There are a few competitors in this space but Houlihan Lokey has a reputation for being one of the best in the industry.
Management: CEO Scott Beiser has been with Houlihan Lokey for 31 years. From 1990 through 2007 he served in roles including COO and Managing Director. In 2003 he was promoted to CEO. Prior to working at Houlihan Lokey, he was a senior financial analyst at Transamerica Life Insurance. Based on this experience, Beiser is a perfect fit for CEO.
Now let’s take a look at the financials. A good value investor should be able to read the income statement, cash flow statement, and balance sheet and within 60 seconds have a pretty good idea of how the business is performing.
Here are the last four years. Houlihan Lokey reported its fiscal year earnings on March 31st, 2021.
Revenue (Found on the Income Statement)
2018: $963M
2019: $1B
2020: $1.1B
2021: $1.5B
Revenue increased substantially in 2021.
Net Income (Found on the Income Statement)
2018: $172M
2019: $159M
2020: $183M
2021: $312M
Net Income also increased substantially in 2021.
EPS (Found on the Income Statement)
2018: 2.76
2019: 2.56
2020: 2.96
2021: 4.70
EPS increased in 2021.
Free Cash Flow (Found on the Cash Flow Statement)
2018: $242M
2019: $217M
2020: $266M
2021: $565M
Free Cash Flow doubled in 2021! Very impressive.
Total Assets (Found on the Balance Sheet)
2018: $1.4B
2019: $1.4B
2020: $1.6B
2021: $2.4B
Total Assets have increased significantly in 2021.
Total Liabilities (Found on the Balance Sheet)
2018: $566M
2019: $531M
2020: $692M
2021: $1B
Total Liabilities have increased which is okay.
Total Debt (Found on the Balance Sheet)
2018: $221M
2019: $8M
2020: $109M
2021: $0
$0 debt in 2021! Very impressive.
Total Equity (Found on the Balance Sheet)
2018: $852M
2019: $891M
2020: $984M
2021: $1.3B
Total Equity has increased.
With a score of 19/20 and a MOS of 66%, the financials are outstanding. When you look at the meaning, we know this business will be around in 10 years. When we look at the moat, we know there are a few competitors but Houlihan Lokey is one of the top-rated in the industry. When we look at the management, Scott Beiser has done an excellent job leading this business as CEO for the last 18 years.
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The Summary, Score, and MOS of this stock may have changed since the posting of this review. Please login to Tykr to see up-to-date information.