A Look at Houlihan Lokey’s (HLI) Valuation After Credit Agreement Expansion and Improved Financing Terms

Houlihan Lokey (HLI) just made a move that will catch the eye of anyone watching the stock. On August 19, the company made a sweeping amendment to its long-standing credit agreement, increasing its revolving commitments from $100 million to $150 million. The company also locked in easier terms, including lower interest margins and fees. By extending the facility’s maturity to 2030 and loosening some financial covenants, the new arrangement could meaningfully boost Houlihan Lokey’s financial flexibility, reduce funding costs, and send a confident signal about where management sees the company heading.

This shift in capital structure comes at a time when Houlihan Lokey’s stock has quietly built momentum, gaining 29% in the past year and over 15% year to date. In addition, shares are up nearly 14% in the past 3 months as investors seem to be reassessing risk and growth potential following upbeat results and healthy annual revenue and net income growth. It is a striking run, especially considering that many companies in the sector are still navigating uncertain economic conditions.

With the credit agreement overhaul in place and shares trading higher than a year ago, the question remains whether Houlihan Lokey is still undervalued or if markets have already priced in its future growth.

Most Popular Narrative: 2.5% Undervalued

According to the community narrative, Houlihan Lokey is currently considered slightly undervalued based on analyst consensus, with a fair value only modestly above the current share price.

“Ongoing global expansion, sector diversification, and talent recruitment position Houlihan Lokey for sustained revenue growth and increased market share. Strong pipelines from succession planning, resilient restructuring activity, and enhanced client engagement are stabilizing fee income and supporting earnings despite macroeconomic shifts.”

If you want the real story behind Houlihan Lokey’s premium valuation, look no further. The narrative is built on ambitious estimates for future growth, profit margins, and market positioning. But which bold assumptions are driving this uptick? The answer may surprise you. Find out what analysts are banking on to justify such a confident price target.

Result: Fair Value of $202.8 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, risks such as muted global deal activity or rising operating costs could quickly challenge the optimistic outlook for Houlihan Lokey's continued growth.

Find out about the key risks to this Houlihan Lokey narrative.

Another View: Our DCF Model Says Otherwise

While analysts see Houlihan Lokey as slightly undervalued, our DCF model tells a different story and suggests the stock may actually be priced well above its fair worth. Which perspective fits reality best?

Look into how the SWS DCF model arrives at its fair value.

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 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Houlihan Lokey Narrative

If you’re looking for a different perspective or would rather investigate the numbers firsthand, you can craft your own outlook in just a few minutes. do it your way.

A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding Houlihan Lokey.

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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.

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