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The most recent earnings announcement Houlihan Lokey, Inc.'s (NYSE:HLI) released in May 2019 showed that the company endured a slight headwind with earnings deteriorating from US$172m to US$159m, a change of -7.6%. Below is my commentary, albeit very simple and high-level, on how market analysts view Houlihan Lokey's earnings growth outlook over the next couple of years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Market analysts' consensus outlook for the coming year seems buoyant, with earnings increasing by a robust 21%. This growth seems to continue into the following year with rates reaching double digit 30% compared to today’s earnings and falls to US$194m by 2022.
Although it’s useful to be aware of the rate of growth year by year relative to today’s level, it may be more beneficial to gauge the rate at which the business is moving on average every year. The benefit of this technique is that it ignores near term flucuations and accounts for the overarching direction of Houlihan Lokey's earnings trajectory over time, be more volatile. To calculate this rate, I've inserted a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 8.9%. This means that, we can expect Houlihan Lokey will grow its earnings by 8.9% every year for the next couple of years.
For Houlihan Lokey, I've put together three key aspects you should look at:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is HLI worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether HLI is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of HLI? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.