Contrasting Houlihan Lokey (NYSE:HLI) & The Goldman Sachs Group (NYSE:GS)

Houlihan Lokey (NYSE:HLI) and The Goldman Sachs Group (NYSE:GS) are both large-cap finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, profitability, institutional ownership, valuation, dividends, analyst recommendations and risk.

Institutional and Insider Ownership

78.1% of Houlihan Lokey shares are owned by institutional investors. Comparatively, 71.2% of The Goldman Sachs Group shares are owned by institutional investors. 22.5% of Houlihan Lokey shares are owned by company insiders. Comparatively, 0.6% of The Goldman Sachs Group shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Profitability

This table compares Houlihan Lokey and The Goldman Sachs Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Houlihan Lokey	15.78%	19.94%	11.51%
The Goldman Sachs Group	15.77%	20.21%	1.08%

Earnings and Valuation

This table compares Houlihan Lokey and The Goldman Sachs Group”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Houlihan Lokey	$2.56 billion	3.97	$425.70 million	$5.96	24.52
The Goldman Sachs Group	$125.10 billion	2.14	$17.18 billion	$69.55	13.36

The Goldman Sachs Group has higher revenue and earnings than Houlihan Lokey. The Goldman Sachs Group is trading at a lower price-to-earnings ratio than Houlihan Lokey, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent ratings for Houlihan Lokey and The Goldman Sachs Group, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Houlihan Lokey	0	5	7	0	2.58
The Goldman Sachs Group	1	13	10	1	2.44

Houlihan Lokey currently has a consensus target price of $160.44, indicating a potential upside of 9.78%. The Goldman Sachs Group has a consensus target price of $1,052.04, indicating a potential upside of 13.19%. Given The Goldman Sachs Group’s higher probable upside, analysts plainly believe The Goldman Sachs Group is more favorable than Houlihan Lokey.

Volatility and Risk

Houlihan Lokey has a beta of 0.9, suggesting that its stock price is 10% less volatile than the S&P 500. Comparatively, The Goldman Sachs Group has a beta of 1.29, suggesting that its stock price is 29% more volatile than the S&P 500.

Dividends

Houlihan Lokey pays an annual dividend of $2.80 per share and has a dividend yield of 1.9%. The Goldman Sachs Group pays an annual dividend of $20.00 per share and has a dividend yield of 2.2%. Houlihan Lokey pays out 47.0% of its earnings in the form of a dividend. The Goldman Sachs Group pays out 28.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Houlihan Lokey has increased its dividend for 9 consecutive years and The Goldman Sachs Group has increased its dividend for 13 consecutive years. The Goldman Sachs Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

The Goldman Sachs Group beats Houlihan Lokey on 11 of the 18 factors compared between the two stocks.

About Houlihan Lokey

Houlihan Lokey, Inc. is a global investment bank headquartered in Los Angeles. Founded in 1972, the firm provides financial advice and related services to corporations, financial sponsors, governments and other organizations. The company’s main businesses include corporate finance, financial restructuring and financial and valuation advisory. Its services include advising on mergers and acquisitions, debt and equity financing, restructuring transactions, and business and asset valuations. Houlihan Lokey serves clients across the Americas, Europe, the Middle East and Asia-Pacific through an international office network.

About The Goldman Sachs Group

The Goldman Sachs Group, Inc. is a global financial services firm founded in 1869 and headquartered in New York City. It serves corporations, financial institutions, governments and individuals across major financial markets worldwide. The company’s businesses include investment banking, global markets, and asset and wealth management. Its services include advising on mergers and acquisitions and other strategic transactions, helping clients raise capital, facilitating trading and risk management, and managing investments and wealth for institutions and individuals.