Houlihan Lokey (HLI) has received a new Buy rating, initiated by BMO Capital analyst, .
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BMO Capital has given its Buy rating due to a combination of factors that highlight Houlihan Lokey’s strategic positioning in the market. The firm is uniquely positioned in the middle-market M&A sector, with a strong focus on restructuring and financial valuation advisory (FVA) services. This positioning allows Houlihan Lokey to capitalize on fragmented markets where it often stands as the only significant player, providing a competitive edge through rich data and extensive market reach.
Moreover, Houlihan Lokey benefits from symbiotic business operations that generate leads and offer counter-cyclical advantages, enhancing long-term growth and earnings stability. The expansion of private credit is driving demand for restructuring services, creating a robust pipeline for the company. Additionally, the firm’s significant exposure to sponsors offers potential earnings growth as these sponsors re-engage in the market. Despite current valuation concerns, the stock remains attractive due to its favorable competitive landscape and potential for mid-market M&A growth.