Houlihan Lokey (NYSE:HLI) and Jefferies Financial Group (NYSE:JEF) Critical Contrast

Houlihan Lokey (NYSE:HLI) and Jefferies Financial Group (NYSE:JEF) are both large-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their institutional ownership, dividends, earnings, risk, valuation, profitability and analyst recommendations.

Institutional and Insider Ownership

78.1% of Houlihan Lokey shares are held by institutional investors. Comparatively, 60.9% of Jefferies Financial Group shares are held by institutional investors. 22.8% of Houlihan Lokey shares are held by insiders. Comparatively, 19.8% of Jefferies Financial Group shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Valuation & Earnings

This table compares Houlihan Lokey and Jefferies Financial Group”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Houlihan Lokey	$2.39 billion	5.95	$399.71 million	$5.94	34.06
Jefferies Financial Group	$7.03 billion	1.66	$743.38 million	$2.91	19.41

Jefferies Financial Group has higher revenue and earnings than Houlihan Lokey. Jefferies Financial 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.

Risk and Volatility

Houlihan Lokey has a beta of 0.87, indicating that its stock price is 13% less volatile than the S&P 500. Comparatively, Jefferies Financial Group has a beta of 1.51, indicating that its stock price is 51% more volatile than the S&P 500.

Profitability

This table compares Houlihan Lokey and Jefferies Financial Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Houlihan Lokey	16.46%	23.75%	14.21%
Jefferies Financial Group	7.40%	7.25%	1.11%

Analyst Recommendations

This is a breakdown of current ratings for Houlihan Lokey and Jefferies Financial Group, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Houlihan Lokey	0	4	5	1	2.70
Jefferies Financial Group	0	4	1	1	2.50

Houlihan Lokey currently has a consensus target price of $212.43, indicating a potential upside of 5.00%. Jefferies Financial Group has a consensus target price of $68.83, indicating a potential upside of 21.86%. Given Jefferies Financial Group’s higher possible upside, analysts clearly believe Jefferies Financial Group is more favorable than Houlihan Lokey.

Dividends

Houlihan Lokey pays an annual dividend of $2.40 per share and has a dividend yield of 1.2%. Jefferies Financial Group pays an annual dividend of $1.60 per share and has a dividend yield of 2.8%. Houlihan Lokey pays out 40.4% of its earnings in the form of a dividend. Jefferies Financial Group pays out 55.0% 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 raised its dividend for 9 consecutive years and Jefferies Financial Group has raised its dividend for 2 consecutive years.

Summary

Houlihan Lokey beats Jefferies Financial Group on 12 of the 17 factors compared between the two stocks.

About Houlihan Lokey

Houlihan Lokey, Inc., an investment banking company, provides merger and acquisition (M&A), capital market, financial restructuring, and financial and valuation advisory services worldwide. It operates in three segments: Corporate Finance, Financial Restructuring, and Financial and Valuation Advisory. The Corporate Finance segment offers general financial advisory services; and advises public and private institutions on buy-side and sell-side transactions, leveraged loans, private mezzanine debt, high-yield debt, initial public offerings, follow-ons, convertibles, equity private placements, private equity, and liability management transactions, as well as advise financial sponsors on various transactions. The Financial Restructuring segment advises debtors, creditors, and other parties-in-interest related to recapitalization/deleveraging transactions. It also provides a range of advisory services, including structuring, negotiation, and confirmation of plans of reorganization; structuring and analysis of exchange offers; corporate viability assessment; dispute resolution and expert testimony; and procuring debtor-in-possession financing. The Financial and Valuation Advisory segment offers valuations of various assets, such as companies, illiquid debt and equity securities, and intellectual property. It also provides fairness opinions in connection with M&A and other transactions, solvency opinions in connection with corporate spin-offs and dividend recapitalizations, and other types of financial opinions. In addition, this segment offers dispute resolution services. It serves corporations, financial sponsors, and government agencies. The company was incorporated in 1972 and is headquartered in Los Angeles, California.

About Jefferies Financial Group

Jefferies Financial Group Inc. operates as an investment banking and capital markets firm in the Americas, Europe, the Middle East, and the Asia-Pacific. The company operates in two segments, Investment Banking and Capital Markets, and Asset Management. It provides investment banking, advisory services with respect to mergers or acquisitions, debt financing, restructurings or recapitalizations, and private capital advisory transactions; underwriting and placement services related to corporate debt, municipal bonds, mortgage-backed and asset-backed securities, equity and equity-linked securities, and loan syndication services; and corporate lending services. The company also offers financing, securities lending, and other prime brokerage services; equities research, sales, and trading services; wealth management services; and online foreign exchange trading services. In addition, it provides investment grade distressed debt securities, U.S. and European government and agency securities, municipal bonds, leveraged loans, emerging markets debt, and interest rate and credit index derivative products; and manages and offers services to a diverse group of alternative asset management platforms across a spectrum of investment strategies and asset classes. The company was formerly known as Leucadia National Corporation and changed its name to Jefferies Financial Group Inc. in May 2018. Jefferies Financial Group Inc. was founded in 1962 and is headquartered in New York, New York.