Houlihan Lokey (HLI) has come into focus after reporting a mixed earnings update, with quarterly revenues declining and missing analyst expectations, while certain advisory segments reached record fourth quarter revenue levels.

HLI’s share price has come under pressure recently, with the stock down 9.66% over the past month and 16.75% year to date. The 5 year total shareholder return of 120.70% reflects much stronger longer term compounding.

The recent decline in the share price, including a 3.46% drop on the day of the earnings release, suggests investors are reassessing near term earnings risk. At the same time, management points to ongoing acquisitions, a busy M&A pipeline, and mandates such as advising GoPro on its review of strategic alternatives.

If this mixed reaction has you looking beyond a single advisor stock, it could be a good moment to broaden your search and check out 19 top founder-led companies

With the stock under pressure, despite a 5-year total return well above shorter-term performance, investors are left asking a simple question: Is this pullback a genuine opportunity, or is the market already pricing in future growth?

Most Popular Narrative: 16% Undervalued

Houlihan Lokey's most followed narrative sets a fair value of $174.50 per share, compared with the last close at $146.81. This frames the current pullback as a gap between price and expectations rather than a simple sentiment swing.

Increasing global corporate complexity and cross-border transactions are driving ongoing demand for independent advisory expertise, as evidenced by resilient revenues and continued international hiring and expansion initiatives, these factors are expected to support sustained top-line revenue growth.

To see what is sitting behind that growth story, note that the revenue runway, earnings ramp, margins and the future profit multiple are all closely linked to this fair value.

Result: Fair Value of $174.50 (UNDERVALUED)

However, this hinges on U.S.-led M&A activity holding up and on Houlihan Lokey keeping its high compensation and other costs from squeezing margins.

Another View: Our DCF Signals Less Upside

While the popular narrative points to a fair value of $174.50 per share and frames Houlihan Lokey as about 16% undervalued, the SWS DCF model tells a different story. On that measure, the stock at $146.81 sits above an estimated future cash flow value of $130.28, suggesting limited valuation cushion instead of a clear discount.

If one method points to a discount and another to a premium, which set of assumptions do you find more convincing?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Houlihan Lokey for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 54 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

If the mixed signals in this article leave you unsure, that is a good reason to move quickly and test the numbers yourself so you are not relying on a single viewpoint. Then round out your research by checking the company’s 4 key rewards

Looking for more investment ideas?

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• Target potential value opportunities by scanning 54 high quality undervalued stocks that combine quality fundamentals with prices that may not fully reflect their financial profile.
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• Prioritise sturdier business models by checking 66 resilient stocks with low risk scores designed to spotlight companies with lower overall risk scores.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.