HLI
Houlihan Lokey, Inc.
$140.01
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Mild
·
Conviction
Fair Value
Trading 12.1% below fair value
You pay
$140.01
Bear
$111.50
Fair
$159.29
Bull
$207.08
Bear
$111.50
-20.4%
ROTCE 20.0% → 2.86x TBV
Fair
$159.29
+13.8%
ROTCE 25.0% → 4.00x TBV
Bull
$207.08
+47.9%
ROTCE 30.0% → 4.00x TBV
Key Value Driver
ROTCE (57.3%) vs. cost of equity (9.6%)
Implied Market Multiple
13.03x
Summary
Our base-case estimate uses P/Tangible Book × ROE Quality. We then blend that result with the average analyst price target of $183.20 from 15 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $159.29 per share.
Warnings
Traditional cash flow models don't work well for banks — lending activity distorts how much cash the business actually generates.
Common valuation shortcuts don't apply here — for banks, interest payments are a core business cost, not overhead.
Dividend-based valuation: $87.90 (42% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Key Risks
- Book value quality matters as much as level — check loan loss reserves
- Interest rate sensitivity creates non-linear earnings surprises
- Insurance reserving is actuarial, not financial — errors emerge slowly