Greenhill & Co. (NYSE: GHL) and Houlihan Lokey (NYSE:HLI) are both small-cap finance companies, but which is the better investment? We will compare the two companies based on the strength of their earnings, profitability, analyst recommendations, valuation, institutional ownership, risk and dividends.

Dividends

Greenhill & Co. pays an annual dividend of $1.80 per share and has a dividend yield of 10.9%. Houlihan Lokey pays an annual dividend of $0.80 per share and has a dividend yield of 2.3%. Greenhill & Co. pays out 135.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Houlihan Lokey pays out 41.7% of its earnings in the form of a dividend.

Profitability

This table compares Greenhill & Co. and Houlihan Lokey’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Greenhill & Co. 13.98% 15.68% 10.43%
Houlihan Lokey 14.10% 18.63% 11.83%

Volatility and Risk

Greenhill & Co. has a beta of 1.29, indicating that its stock price is 29% more volatile than the S&P 500. Comparatively, Houlihan Lokey has a beta of 0.31, indicating that its stock price is 69% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Greenhill & Co. and Houlihan Lokey, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Greenhill & Co. 5 1 0 0 1.17
Houlihan Lokey 0 2 2 0 2.50

Greenhill & Co. currently has a consensus target price of $21.17, indicating a potential upside of 27.90%. Houlihan Lokey has a consensus target price of $38.00, indicating a potential upside of 8.26%. Given Greenhill & Co.’s higher probable upside, analysts plainly believe Greenhill & Co. is more favorable than Houlihan Lokey.

Insider and Institutional Ownership

94.4% of Greenhill & Co. shares are owned by institutional investors. Comparatively, 32.1% of Houlihan Lokey shares are owned by institutional investors. 8.3% of Greenhill & Co. shares are owned by insiders. Comparatively, 69.7% of Houlihan Lokey shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Valuation and Earnings

This table compares Greenhill & Co. and Houlihan Lokey’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Greenhill & Co. $299.08 million 1.64 $39.42 million $1.33 12.44
Houlihan Lokey $907.54 million 0.96 $47.68 million $1.92 18.28

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

Summary

Houlihan Lokey beats Greenhill & Co. on 11 of the 16 factors compared between the two stocks.

Greenhill & Co. Company Profile

Greenhill & Co., Inc. is an investment bank. The Company provides financial and strategic advice on domestic and cross-border mergers and acquisitions, divestitures, restructurings, financings, capital raising and other transactions to a diverse client base, including corporations, partnerships, institutions and governments globally. The Company also provides advice in connection with defense preparedness, activist response strategies and other mission critical situations. The Company acts for clients located across the world from its offices located in the United States, Australia, Brazil, Canada, Germany, Hong Kong, Japan, Sweden, and the United Kingdom. The Company’s subsidiaries provide advisory services in various jurisdictions. Its operating entities include Greenhill & Co., LLC (G&Co), Greenhill & Co. International LLP (GCI), Greenhill & Co. Europe LLP (GCE), Greenhill & Co. Australia Pty Limited (Greenhill Australia) and Greenhill Cogent, LP (GC LP).

Houlihan Lokey Company Profile

Houlihan Lokey, Inc. is a global independent investment bank that focuses on mergers and acquisitions (M&A), financings, financial restructurings and financial advisory services. The Company operates through three segments: Corporate Finance, Financial Restructuring and Financial Advisory Services. The Company serves a set of clients across the world, including corporations, financial sponsors and government agencies. The Company provides financial professionals with an integrated platform that enables them to deliver advice to its clients. The Company also offers intellectual property advisory services. The Corporate Finance activities include two categories: M&A and capital markets advisory. The Financial Advisory Services segment includes financial opinions, and a range of valuation and financial consulting services in the United States. The Financial Restructuring segment provides advice to debtors and creditors in connection with recapitalization/deleveraging transactions.

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