What does return on equity mean?

How much profit the company earns on the money shareholders have invested.

How do you interpret return on equity?

Higher is better, but very high ROE can be manufactured by leverage — a thin equity base inflates the ratio. Read it next to debt-to-equity and ROIC to tell genuine returns from balance-sheet engineering.

How does return on equity compare across companies?

Comparable across peers, with the leverage caveat. Negative or near-zero equity makes ROE meaningless, so it is suppressed there.

Houlihan Lokey HLI Return on equity

Discontinued — last reported Q4 '16

Return on equity at other companies

Goldman Sachs GroupGS

14.6%+2.4pp

EvercoreEVR

45.4%+15.7pp

Jefferies Financial GroupJEF

6.8%-0.2pp

CBRE GroupCBRE

15.6%+3.5pp

Jones Lang LaSalleJLL

12.6%+4.4pp

LPL Financial HoldingsLPLA

20.5%-19.9pp

Other financials

Income statement

See full

Revenue$635.6M-4.6%

Gross profit$230.7M+15.9%

Operating income$125.1M-11.3%

Net income$99.8M-18.1%

EPS (diluted)$1.48-16.4%

Balance sheet

See full

Cash & equivalents$1.2B+22.5%

Total debt$492.1M+12.3%

Total assets$4.3B+12.8%

Cash flow

See full

Operating cash flow$293.0M-18.2%

CapEx$6.3M-56.8%

Free cash flow$286.8M-16.6%

Valuation

See full

Market cap$9.72B-11.5%

Enterprise value$9.02B-13.6%

P/E22.8×-4.7×

P/S3.7×-0.9×

Profitability

See full

Gross margin32.8%+1.4pp

Operating margin20.1%-0.9pp

Net margin16.3%-0.5pp

FCF margin26%-7.8pp

Where this comes from

Calculated from Houlihan Lokey’s reported figures.

net income/total stockholders equity=9.5%

Based on trailing twelve months.

The official record: Houlihan Lokey’s 10-K, filed June 13, 2017, on SEC EDGAR. View the filing →

Questions, answered.

What does return on equity mean?: How much profit the company earns on the money shareholders have invested.
How do you interpret return on equity?: Higher is better, but very high ROE can be manufactured by leverage — a thin equity base inflates the ratio. Read it next to debt-to-equity and ROIC to tell genuine returns from balance-sheet engineering.
How does return on equity compare across companies?: Comparable across peers, with the leverage caveat. Negative or near-zero equity makes ROE meaningless, so it is suppressed there.