HOULIHAN LOKEY, INC.

Houlihan Lokey, Inc. maintains a strong liquidity position, with cash and equivalents amounting to $1.06 billion as of Q3 2026, representing 26.8% of total assets. The company's liquidity FPT (free cash flow to total liabilities) is 2.41, significantly above the industry median of 1.2, indicating robust short-term financial flexibility. The debt-to-equity ratio is 0.0, reflecting a conservative capital structure with no leverage, which is atypical for the investment banking sector where leverage is often used to amplify returns. Profitability metrics show Houlihan Lokey, Inc. is outperforming industry benchmarks. Return on equity (ROE) is 14.21%, well above the industry median of 9.5%, and return on assets (ROA) is 8.28%, compared to a median of 5.8%. These figures suggest the company is efficiently deploying capital and generating strong returns for shareholders. The operating margin of 20.3% is also above the industry median of 16.2%, indicating superior cost control and pricing power in its advisory services. The company's revenue is distributed across three segments: Corporate Finance (CF), Financial Restructuring (FR), and Financial and Valuation Advisory (FVA). CF is the largest contributor, accounting for 58% of total revenue, followed by FVA at 29% and FR at 13%. Geographically, the U.S. accounts for 72% of revenue, with the remaining 28% coming from international markets. This concentration in the U.S. exposes the company to domestic economic cycles and regulatory changes. Looking ahead, Houlihan Lokey, Inc. is projected to grow revenue by 12.4% in FY 2026 and 8.7% in FY 2027, driven by increased demand for M&A advisory services and capital solutions. The company's free cash flow is expected to grow by 10.2% in FY 2026, supported by stable operating cash flow and low capital expenditure requirements. Historical revenue growth has averaged 9.3% annually over the past five years, suggesting a consistent performance in a volatile industry. The company faces moderate dilution risk, with a dilution score of medium. The risk assessment highlights potential dilution from future equity offerings or share-based compensation. The company has not issued new shares in the past 12 months, but the risk remains due to the presence of share-based compensation plans and the potential for future capital-raising activities. The valuation adjustments applied in the custom valuations reflect a conservative approach to potential dilution, with a 5% downward adjustment to the price-to-earnings ratio. Recent filings and transcripts indicate the company is preparing for new accounting standards effective after December 15, 2026, which may impact goodwill impairment testing and revenue recognition. The company has also noted the need to periodically review ROU assets for impairment, suggesting a cautious approach to asset valuation. These developments highlight the company's proactive stance on regulatory compliance and financial reporting.