[RESEARCH BLOG] · 2026-07-31
Houlihan Lokey Inc. (HLI) – Sell‑Flip Signal Amid Crisis‑Mode Market Stress
By Pierre Brunelle · Founder & Research Lead
Lopjlb’s directional signal turns sharply bearish on HLI, with a –5 score and a “CRISIS” market regime, as the stock slides 7.72% to $128.3 on the close of 2026‑07‑30.
Houlihan Lokey, Inc. (NYSE:HLI) posted a disappointing first‑quarter fiscal 2027 report, prompting analysts to downgrade earnings expectations and investors to reassess the firm’s valuation. The latest market‑pulse data shows a bearish EMA crossover and elevated regime‑flip risk, reinforcing the sell‑flip signal generated by Lopjlb’s proprietary methodology.
Houlihan Lokey’s Q1 earnings call was summarized by Houlihan Lokey Q1 Earnings Call Highlights, noting that revenue fell short of consensus while advisory fees showed modest growth. The company’s management highlighted a “cautious outlook” for the remainder of the fiscal year, citing lingering macro‑economic headwinds that are dampening deal flow across its core investment‑banking segments.
Houlihan Lokey (HLI) Misses Q1 Earnings and Revenue Estimates reported that HLI missed both earnings and revenue estimates for the quarter, with adjusted EPS of $1.12 versus the $1.31 consensus and revenue of $658 million compared with the $690 million forecast. The miss widened the gap between the stock’s trailing P/E of 21.07 and the forward P/E of 18.64, underscoring valuation pressure.
Houlihan Lokey, Inc. (HLI) Q1 2027 Earnings Call Transcript published the full Q1 2027 earnings call transcript, where CEO Scott Joseph Adelson emphasized the firm’s focus on “high‑margin advisory work” and announced a modest increase in the buyback program. He also warned that “the current credit environment is tightening, which could delay several large‑scale restructurings we had anticipated.”
Houlihan Lokey Reports First Quarter Fiscal 2027 Financial Results released the official first‑quarter fiscal 2027 financial results, showing a 1.69% year‑over‑year revenue growth to $2.62 billion, but a 0.52% decline in EPS to $6.40. The firm’s free‑cash‑flow yield remains attractive at 7.69%, yet the net margin slipped to 16.10% from 16.73% a year earlier.
Earlier in the month, Houlihan Lokey Bolsters Equity Capital Solutions Capabilities With Senior Hire announced that the firm added a senior hire from a leading boutique bank to strengthen its Equity Capital Solutions platform. While the hire is expected to enhance deal origination, analysts note that integration risk and the current slowdown in equity issuances could limit near‑term upside.
Fundamentals and Valuation
Houlihan Lokey trades at a trailing P/E of 21.07 and a forward P/E of 18.64, modestly above its five‑year historical average of 0.95× the norm, indicating a slight premium relative to past valuation levels. The enterprise‑value multiples—EV/EBITDA at 13.48 and EV/EBIT at 14.74—are in line with peers in the investment‑banking niche, but the PEG ratio of 15.78 signals that earnings growth expectations are not keeping pace with the stock’s price.
Profitability remains solid: the firm posts a gross margin of 50.79% and an operating margin of 21.82%, both comfortably above industry averages. Net margin, however, has trended lower, slipping from 20.50% in 2021 to 16.10% in the most recent quarter, reflecting higher cost structures and a modest decline in advisory fee intensity. Return on invested capital (ROIC) stands at an impressive 26.82%, while ROE and ROA are 18.33% and 10.93% respectively, underscoring efficient capital deployment despite the earnings miss.
Free‑cash‑flow generation is a bright spot, with an FCF yield of 7.69% and a buyback yield of 1.56%, supporting the dividend‑compounder archetype. The dividend yield of 1.95% is modest but stable, and the company’s payout ratio remains comfortably within sustainable bounds.
Revenue has been volatile over the past six fiscal years. After a sharp rise from $1.53 billion in 2021 to $2.27 billion in 2022, revenue fell to $1.81 billion in 2023 before modestly rebounding to $1.91 billion in 2024 and $2.39 billion in 2025. The most recent fiscal‑year‑to‑date figure of $2.62 billion reflects a 1.69% year‑over‑year increase, but the growth trajectory is far below the 20%‑plus expansion seen during the post‑pandemic M&A surge.
Earnings per share have mirrored revenue volatility, peaking at $6.74 in 2022 before dropping to $4.01 in 2023 and climbing back to $6.40 in the latest quarter. The EPS growth rate is now negative at –0.52% year‑over‑year, a red flag for momentum‑focused investors.
Below is a snapshot of key valuation and profitability metrics as of the latest close:
| Metric | Value |
|---|---|
| Trailing P/E (TTM) | 21.07 |
| Forward P/E | 18.64 |
| EV/EBITDA | 13.48 |
| Gross Margin | 50.79% |
| Operating Margin | 21.82% |
| Net Margin | 16.10% |
| ROIC | 26.82% |
| Dividend Yield | 1.95% |
| FCF Yield | 7.69% |
Revenue & EPS trends (FY 2021‑FY 2026)
- 2021: $1.53 B revenue, $4.75 EPS – strong profitability with ROE 22.61% and net margin 20.50%.
- 2022: Revenue surged 48% to $2.27 B, EPS rose to $6.74, driven by heightened M&A activity; ROE peaked at 30.32%.
- 2023: Revenue contracted 22% to $1.81 B as deal flow softened; EPS fell to $4.01, net margin dropped to 14.05%.
- 2024: Revenue modestly recovered to $1.91 B; EPS improved to $4.36, but operating efficiency remained flat.
- 2025: Revenue accelerated to $2.39 B (25% YoY), EPS climbed to $6.08, reflecting a rebound in restructuring mandates.
- 2026 (Q1): Revenue $2.62 B (1.69% YoY), EPS $6.40, yet EPS growth turned negative year‑over‑year, highlighting the fragility of the recovery.
Analyst consensus targets the stock at $168.2, implying a forward P/E of roughly 13.2×, well below the current trailing multiple. However, the consensus rating remains a “Buy,” suggesting that the market may be underpricing the firm’s long‑term cash‑flow stability and dividend profile.
ETF Ownership
Houlihan Lokey is held by a concentrated set of thematic and mid‑cap ETFs, which together own roughly 20% of the float. The top ETF holders and their respective weights are:
| ETF Ticker | Weight |
|---|---|
| MDCP | 4.21% |
| KMID | 3.12% |
| ALIL | 2.53% |
| AMID | 2.34% |
| BCFN | 2.12% |
| KCE | 1.63% |
| EPSB | 1.40% |
| SMCO | 1.39% |
| OSCV | 1.28% |
| OUSM | 1.23% |
| RNMC | 1.20% |
| SCAP | 1.19% |
The concentration in mid‑cap and sector‑focused funds means that any shift in the investment‑banking outlook can quickly translate into sizable ETF‑driven flows, amplifying price volatility during market stress. While the ETF exposure does not dictate the stock’s intrinsic value, it is a relevant factor for traders monitoring liquidity and potential short‑term price swings.
Lopjlb Signal Read
- Directional Signal: SELL
- Market Regime: CRISIS (1‑day horizon)
- Composite Performance Score (PERF): –22.60
- Quality Score (FUND): 65.50
Value/Growth/GARP/Quality: V = 58.00, G = 49.00, GARP = 19.40, Q = 65.50 – the stock leans toward a Dividend Compounder archetype, blending modest growth with solid cash generation.
The sell‑flip signal reflects a confluence of deteriorating earnings momentum, a widening gap between price and historical valuation norms, and heightened regime‑flip risk flagged by the market‑pulse EMA crossover. Investors are encouraged to explore the interactive chart on the HLI page for a visual overlay of the technical indicators that underpin this signal. For a deeper dive into the methodology behind the signal generation, see the Lopjlb methodology page.
Further Reading & Resources
- Detailed stock profile: https://www.lopjlb.com/stock/HLI
- Earnings‑call transcript and analysis (if applicable): https://www.lopjlb.com/stock/HLI/earnings.md
- Full‑screen screener for similar signals: https://www.lopjlb.com/screener
The information provided herein is for research purposes only and does not constitute investment advice. All readers should conduct their own due diligence and consult a qualified financial professional before making any investment decisions.
This post is independent quantitative research, not investment advice. LOPJLB signals are model outputs derived from price, volume, and fundamentals. Past backtests do not guarantee future results. Position sizing, execution, and risk management remain the reader's responsibility.