Houlihan Lokey (HLI): 18% ROE, $485M TTM FCF, and a 22.3x P/E under a deal-market test (2026)

Houlihan Lokey (NYSE: HLI) is this week's candidate because the three completed fiscal years clear the channel's ROE floor, free cash flow stays positive, and the stock trades below its own recent earnings-multiple history. The qualification comes with a live operating question: first-quarter fiscal 2027 revenue fell 16% year over year as Corporate Finance revenue fell 24%.

The pick

At the August 28, 2026 close, HLI traded at $133.02, with a market capitalization of $9.30 billion, trailing P/E of 22.34x, P/B of 4.12x, P/FCF of 19.17x, and a 5.22% trailing FCF yield. StockAnalysis reported the price and valuation snapshot on that date. 1

The screen is split into three parts:

ROE: 16.25% in FY2024, 19.93% in FY2025, and 18.33% in FY2026. Every year clears the channel's 15% threshold. 2
FCF: $85.54 million in FY2023, $261.73 million in FY2024, $808.91 million in FY2025, and $681.82 million in FY2026. Trailing FCF was $484.82 million through June 30, 2026. Each reported period remains positive, although the direction has weakened since FY2025. 3
Valuation: the current P/E is below HLI's FY2022-FY2026 average of about 24.12x and median of 23.62x. The current P/B of 4.12x sits close to the historical median near 4.10x. P/FCF at 19.17x is less attractive than the earnings multiple. 1 2

The reader's main question is whether a high-return advisory business can regain deal activity before the recent FCF decline becomes a longer trend. HLI is a candidate for further research under that condition. The numbers support a qualified screen pass rather than a blanket endorsement.

Scope and definitions

HLI's fiscal year ends on March 31. FY2024 means the year ended March 31, 2024; FY2025 means March 31, 2025; and FY2026 means March 31, 2026. The latest quarterly comparison is Q1 FY2027, ended June 30, 2026. Annual financial figures are in millions of U.S. dollars unless stated otherwise. 4 5

ROE uses the labeled StockAnalysis ratio. A reader using a period-end-equity calculation may obtain a different percentage because reported ROE can use average equity. The article keeps one ratio definition throughout. FCF means operating cash flow minus capital expenditures. Valuation figures use the August 28, 2026 market close, while annual figures use the latest completed fiscal years.

A public, reproducible export covering the entire U.S. equity universe with identical ROE, FCF, and valuation definitions was unavailable. This edition used a new public route through StockAnalysis search results and SEC EDGAR verification, then verified HLI and its directional peers individually. The article therefore presents HLI as a qualified candidate from the available screen rather than claiming that HLI was the only U.S. qualifier.

The three gates

ROE: three consecutive years above 15%

Fiscal year	Period ended	Reported ROE	Channel threshold	Result
FY2024	Mar. 31, 2024	16.25%	>15%	Pass
FY2025	Mar. 31, 2025	19.93%	>15%	Pass
FY2026	Mar. 31, 2026	18.33%	>15%	Pass
Current reported figure	TTM data pull	17.79%	Context only	Above threshold

The figures in the table come from HLI's reported financial ratios. 2

The three-year record clears the hard gate by 1.25 to 4.93 percentage points. The current reported ROE of 17.79% remains above the threshold, but the completed-year series carries the screen because it avoids mixing a partial current period with full fiscal years. 1

FCF: positive, with a clear slowdown

Period	Operating cash flow	Capital expenditures	FCF	Change from prior period
FY2023	Not shown in the summary pull	Not shown in the summary pull	$85.54M	—
FY2024	Not shown in the summary pull	Not shown in the summary pull	$261.73M	+206.0%
FY2025	Not shown in the summary pull	Not shown in the summary pull	$808.91M	+209.0%
FY2026	Not shown in the summary pull	Not shown in the summary pull	$681.82M	-15.7%
TTM through Jun. 30, 2026	$500.13M	$15.31M	$484.82M	-28.9% vs. FY2026

The figures in the table come from HLI's reported cash flow statement and statistics page. 1 3

The positive-FCF gate passes. The trend deserves equal billing: FY2026 FCF fell 15.7% from FY2025, and the trailing figure through June 2026 is below FY2026. A company with contingent advisory fees can produce uneven cash results as transactions close at different times. The data still leaves a specific monitoring task: the next several quarters must show whether the decline is timing or a lower earnings base.

Valuation: a conditional pass

HLI's current trailing P/E of 22.34x is below its FY2022-FY2026 readings of 13.51x, 23.62x, 31.61x, 28.34x, and 23.54x for FY2022 through FY2026, respectively. The five-year average is about 24.12x and the median is 23.62x. Current P/B of 4.12x sits near the historical readings of 4.10x, 3.72x, 4.82x, 5.21x, and 4.09x. 2

The valuation rule used here is explicit: a conditional pass requires a current P/E at or below both the five-year median and average, plus a P/B within the observed five-year range. HLI meets those two tests. The cash-flow multiple adds a warning. At 19.17x, HLI's P/FCF is higher than PJT Partners' 11.30x and Lazard's 6.46x. 1 6 7

Company	Trailing P/E	P/B	P/FCF	FCF yield	EV/EBITDA
HLI	22.34x	4.12x	19.17x	5.22%	n/a
PJT Partners	29.69x	14.99x	11.30x	8.85%	n/a
Lazard	21.49x	4.65x	6.46x	15.49%	n/a

Data as of the August 28, 2026 close. The peer median is 25.59x on P/E and 9.82x on P/B, although PJT's high P/B makes that two-company median a rough directional anchor. HLI's P/E is below the peer median, while its P/FCF is above both peers. 1 6 7

All three pages report EV/EBITDA as unavailable. The omission fits the business model: an investment bank's revenue comes from advisory fees, restructuring mandates, valuation work, employee compensation, and transaction timing. EBITDA and enterprise value are less useful when debt is not the capital that produces the advisory revenue and when cash, investments, and working-capital movements sit alongside client and operating obligations. P/E, P/FCF, FCF yield, and capital ratios carry more information here. The article keeps EV/EBITDA as n/a rather than substituting another measure.

The business

Houlihan Lokey is an independent investment bank. It advises corporations, financial sponsors, and governments on strategic and financial decisions. Its three reportable segments are Corporate Finance, Financial Restructuring, and Financial and Valuation Advisory. 4 8

Corporate Finance handles mergers and acquisitions, capital solutions, and board advisory. In plain language, clients pay HLI to help decide whether to buy, sell, combine, refinance, or defend a company, then to manage the financial work around that decision. Financial Restructuring advises companies and creditors when debt needs to be renegotiated or a formal bankruptcy process becomes possible. Financial and Valuation Advisory covers fairness opinions, valuation work, and financial consulting. 8

The model is people-led. HLI reported more than 1,900 financial professionals, more than 30 offices, and approximately 2,800 employees worldwide for FY2026. Employee shareholders owned about 21% of the equity, according to the fiscal 2026 Form 10-K. 4 The ownership structure can align senior employees with long-term firm value, while also making retention of managing directors a direct business issue.

HLI's service mix also creates a natural counterweight across the cycle. M&A and capital-solutions work tends to depend on healthy markets and willing buyers. Restructuring demand can rise when companies face refinancing pressure. Valuation and fairness work adds a separate source of assignments. HLI's FY2026 Form 10-K describes changing market conditions and contingent fees tied to milestones such as transaction closings as sources of revenue volatility. 4

Revenue and earnings trend

Fiscal year	Revenue	Revenue growth	Operating income	Net income	Diluted EPS
FY2023	$1,809M	-20.28%	$380.49M	$254.22M	$3.76
FY2024	$1,914M	+5.80%	$399.10M	$280.30M	$4.11
FY2025	$2,389M	+24.81%	$556.08M	$399.71M	$5.82
FY2026	$2,618M	+9.55%	$618.54M	$425.70M	$6.22
TTM through Jun. 30, 2026	$2,524M	+1.72%	$583.54M	$405.70M	$5.95

The figures in the table come from HLI's reported income statement. 9

The annual trajectory is strong after the FY2023 trough: revenue grew 44.7% from FY2023 to FY2026, while net income grew 67.4%. FY2026 still delivered 9.55% revenue growth and 6.87% diluted EPS growth. 9

The next quarter changed the pace. Q1 FY2027 revenue was $511 million, versus $605 million in Q1 FY2026. Net income fell to $78 million from $98 million, GAAP diluted EPS fell to $1.15 from $1.42, and adjusted diluted EPS fell to $1.35 from $2.14. Corporate Finance revenue fell 24% to $303 million; Financial Restructuring fell 8% to $119 million; Financial and Valuation Advisory rose 13% to $89 million. 5

HLI's CEO described the Corporate Finance headwinds as temporary and said the timing of a recovery was difficult to predict. That statement gives the thesis a testable condition: a recovery requires Corporate Finance to stop driving year-over-year group declines, while FVA continues to grow and Restructuring remains a stabilizer. 5

Balance sheet and capital return

The August 28 data pull showed $745 million of cash, $493 million of total debt, and $252 million of net cash. HLI reported a 1.66 current ratio, 0.21 debt-to-equity ratio, and debt equal to about 1.02x TTM FCF. 1

The fiscal 2026 Form 10-K gives the debt structure more context. HLI's revolving credit facility allows borrowings of up to $150 million, with an expansion option to $200 million, and matures on August 19, 2030. The filing states that no principal was outstanding under the facility at March 31, 2026 and that the facility carries a consolidated leverage covenant below 2.00 to 1. 4

Liquidity is also visible in the latest quarter. Cash and investment securities totaled $797 million at June 30, 2026. HLI repurchased 348,000 shares during Q1 FY2027 and declared a quarterly dividend of $0.70 per share, payable September 15, 2026 to shareholders of record September 1, 2026. 5

The balance sheet supports patience through a weak quarter, while the income statement still depends heavily on fee-generating mandates and employee compensation. Cash and leverage reduce financing pressure; they do not remove the need for deal activity.

Near-term catalysts

The next earnings report is the first checkpoint. The August 28 data page listed the latest earnings date as July 29, 2026 and the next ex-dividend date as September 1, 2026. The next quarterly report should be read through four numbers: Corporate Finance revenue, total revenue, diluted EPS, and FCF. 1

A Corporate Finance recovery would change the earnings path. Q1 FY2027 Corporate Finance revenue of $303 million was 24% below the prior-year quarter. A return to year-over-year growth in that segment would provide evidence that the current pressure is timing-related. Two consecutive quarters with Corporate Finance revenue above the comparable prior-year quarter would be a useful confirmation standard for further research. 5

Restructuring demand can offset part of the cycle. Financial Restructuring revenue was $119 million in Q1 FY2027, down 8% year over year. A return to year-over-year growth in that segment would add a second source of recovery evidence, especially if Corporate Finance remains uneven. 5

The dividend milestone is close. The September 1, 2026 record date and September 15, 2026 payment date offer a near-term check on capital return, while the next results will show whether the $0.70 quarterly dividend remains comfortably supported by cash generation. 5

Risks to monitor

Deal-market and geopolitical timing. HLI's Q1 FY2027 release tied the current Corporate Finance pressure to instability in the Middle East and disruption in the software sector. Monitor the next two quarterly reports for Corporate Finance revenue remaining at least 20% below the prior-year comparable quarter. That level would show that the stated temporary headwind is persisting through a half-year of results. 5

FCF compression. FY2026 FCF fell 15.7% from FY2025, and TTM FCF through June 2026 was $484.82 million. A second consecutive full fiscal year of FCF decline, or TTM FCF below $400 million, would weaken the positive-cash-generation part of the thesis. 1 3

ROE moving through the screen floor. The channel's hard boundary is 15% in each of the three latest completed fiscal years. Any completed fiscal year at or below 15% would fail the screen and require a new review of earnings, equity, and acquisition effects. 2

People and execution. HLI competes for managing directors and senior deal professionals, while the company says industry knowledge, execution skills, client relationships, reputation, and price shape competition. A departure of a senior team tied to a material practice, or a measurable fall in managing-director headcount in the next annual filing, would raise execution risk. 4

Goodwill and acquisition integration. Goodwill and other intangible assets totaled approximately $1.60 billion at March 31, 2026. The annual report identifies integration difficulty, key-person loss, legal liabilities, dilution, and goodwill impairment as acquisition-related risks. A material impairment charge or a disclosed integration problem in a subsequent filing would reduce the value assigned to the acquisition strategy. 4

Valuation losing its support. The current P/E of 22.34x is below HLI's five-year median of 23.62x, while the P/FCF of 19.17x remains high against the two directional peers. A P/E above 23.62x combined with TTM FCF below $400 million would remove the two main quantitative supports for the current valuation judgment. 1 2

Conditional bottom line

HLI clears the channel's ROE gate in FY2024, FY2025, and FY2026, and FCF remains positive through the latest trailing period. The balance sheet carries net cash, low debt-to-equity, and an undrawn revolving facility with a 2030 maturity. The current P/E fits the defined historical screen, and the current P/B sits inside the recent range.

The weaker part is current operating momentum. Q1 FY2027 revenue and earnings fell sharply, FY2026 FCF declined from FY2025, and HLI's P/FCF is higher than the two directional peers. The valuation argument depends on a return of deal activity and on cash generation stabilizing above the current trailing level.

For a retail investor deciding whether to research HLI further, the next evidence to collect is specific: two quarters of Corporate Finance revenue recovery, a stable or improving FCF run rate, and a completed-year ROE above 15%. Those facts would strengthen the screen. A P/E above 23.62x alongside TTM FCF below $400 million would weaken it. The reader can set the position decision against those conditions and their own risk tolerance.

This article is for informational purposes only and does not constitute investment advice. Public financial data can change after publication. Investors should perform independent due diligence before making any investment decision.

References

1
Houlihan Lokey statistics and valuation
stockanalysis.com
2
Houlihan Lokey financial ratios
stockanalysis.com
3
Houlihan Lokey cash flow statement
stockanalysis.com
4
HLI fiscal 2026 Form 10-K
sec.gov
5
HLI first-quarter fiscal 2027 Form 8-K
sec.gov
6
PJT Partners statistics and valuation
stockanalysis.com
7
Lazard statistics and valuation
stockanalysis.com
8
Houlihan Lokey services
hl.com
9
Houlihan Lokey income statement
stockanalysis.com

The pick

The screen is split into three parts:

ROE: 16.25% in FY2024, 19.93% in FY2025, and 18.33% in FY2026. Every year clears the channel's 15% threshold. 2
FCF: $85.54 million in FY2023, $261.73 million in FY2024, $808.91 million in FY2025, and $681.82 million in FY2026. Trailing FCF was $484.82 million through June 30, 2026. Each reported period remains positive, although the direction has weakened since FY2025. 3
Valuation: the current P/E is below HLI's FY2022-FY2026 average of about 24.12x and median of 23.62x. The current P/B of 4.12x sits close to the historical median near 4.10x. P/FCF at 19.17x is less attractive than the earnings multiple. 1 2

Scope and definitions