Chapter 6

Valuation and De-Rating

Hamilton Lane's shares have fallen about 59% from their November 2024 peak, yet the earnings the report has traced kept rising through the fall. Non-GAAP EPS grew from $5.04 to $5.90 over the same window in which the price dropped from $201.62 to $83.16, so the drawdown is almost entirely multiple compression — from roughly 40x to 14x — not deteriorating results. At 13.3x forward earnings, with a net-cash balance sheet and every published sell-side target above spot, the question is whether that repricing is an overreaction or a permanent reset.

Price fell, earnings rose

The stock peaked at a $201.62 close on 11 November 2024. It was still $148.67 at fiscal 2025 year-end (March 2025) and $134.31 as late as December 2025 before the sharp leg down: $99.40 by March 2026 and $83.16 by late July 2026. Two-thirds of the decline is recent, concentrated in calendar 2026.

What did not fall is the earnings base. Fee Related Earnings compounded from $206.7M (FY2024) to $276.5M (FY2025) to $344.5M (FY2026) [1]. GAAP diluted EPS rose $3.69 → $5.41 → $5.92 and the dividend $1.78 → $1.96 → $2.16 [2]. Non-GAAP EPS — the basis consensus uses — went $3.92 → $5.04 → $5.90, on adjusted net income of $321.2M in FY2026 [3].

Source: market price history, as reported; peak close of $201.62 on 11 Nov 2024 and $83.16 on 24 Jul 2026.

The whole drawdown, then, is a change in what the market will pay for a dollar of Hamilton Lane's earnings, not a fall in the earnings themselves.

The multiple, in its own history

Holding earnings on their reported non-GAAP basis, the compression is stark. At the peak the stock changed hands near 40x that year's earnings; today it trades at roughly 14x trailing and 13.3x the FY2027 consensus.

Source: derived from market price ÷ reported non-GAAP EPS — FY2025 EPS $5.04 and FY2026 EPS $5.90 [4]; FY2027/FY2028 on consensus EPS of $6.26 / $7.36.

Put differently: non-GAAP EPS rose about 17% from FY2025 to FY2026 while the price fell 59%, so the multiple did all the work — contracting roughly 65%. A 40x multiple prices in years of premium compounding; a 13x multiple prices in something much closer to a mature, cyclically-exposed fee stream. The market has moved Hamilton Lane from the first bucket toward the second.

What $83 buys today

Sources: price and consensus mean target ($126.86) as reported; dividend of $2.16 per share [5]; FY2027 consensus EPS $6.26.

At $83.16, buyers pay 13.3x FY2027 and 11.3x FY2028 consensus EPS ($6.26 and $7.36) for a business earning a 27% return on equity and a ~50% fee-related margin. That is a 7.5% forward earnings yield plus a 2.6% dividend that has been raised every year. On roughly 54.5M fully-exchanged shares, the equity is valued near $4.5 billion.

The tension with the growth this report has already documented is the point. Consensus models revenue up about 19% in FY2027 and 16% in FY2028, and management fees compounding on fee-earning AUM that grew to $81.5 billion (see Growth Engine). A low-teens multiple applied to double-digit forward growth implies the market either doubts the growth or expects the multiple itself to keep falling. The arithmetic does not decide which — it only frames how much pessimism the price now carries.

A margin-of-safety ledger

Several features bound the downside independent of the multiple debate. The balance sheet is net cash — $361.0M against $278.4M of debt — a point established in the Financials and Estimates tab. The board raised the repurchase authorization to $100 million in May 2026, with about $80 million still available and no expiry, having bought 199,000 shares in the March 2026 quarter at an average of $100.43 [6]. That the buyback was executed well above today's price cuts both ways: it signals conviction, but it also means capital was returned at a richer valuation than the one on offer now.

The scenario band below is illustrative — it pairs a plausible earnings path with a multiple, and names the driver behind each. It is a range with its levers, not a target.

Source: illustrative — non-GAAP EPS paths bracket FY2027–FY2028 consensus of $6.26–$7.36; multiples span peer-convergence (bear) to a partial re-rating toward Hamilton Lane's own history (bull).

The bear case is not a collapse: with earnings holding near $6 and the multiple converging toward where the larger, faster-growing StepStone trades, the stock sits in the low-to-mid $70s — a modest loss from spot, not a rout. The base case, roughly consensus earnings at a 14–15x multiple, lands near $95–100. The bull case — mid-teens FRE compounding carrying non-GAAP EPS past $7.40 and a re-rating toward 18–20x — reaches the $130–150 area, which is where the published targets cluster (mean $126.86, high $174, and a low of $94 that still sits above spot). The distribution is asymmetric: net cash, a covered and growing dividend, and rising earnings put a firmer floor under the price than the ceiling is capped, provided the earnings base holds.

Where this read could be wrong

The clean "earnings rose, only the multiple fell" story has a real counter, and it is that the compression may be correct rather than excessive. Three facts cut against the cheapness.

First, the quality of the earnings the 14x is applied to is lower than the headline. Fee-related performance revenues grew from $2.4M to $102.5M in two years and now sit inside "recurring" Fee Related Earnings — a performance-linked, market-sensitive line dressed as annuity revenue, as the Financials and Estimates tab set out. A 14x multiple on partly-performance earnings is not the same bargain as 14x on pure management fees.

Second, Hamilton Lane is not the scale leader. StepStone's fee-earning AUM reached $144.0 billion, up 19%, against Hamilton Lane's $81.5 billion up 13% (Competitive Position) — a direct peer both larger and growing faster while charging less. If the market is repricing Hamilton Lane from premium compounder toward peer-average, a low-teens multiple is the destination, not an anomaly.

Third, the setup is cyclical. Fee-earning AUM has compounded at only about 7% a year since FY2022 once the fee-rate mix-shift is stripped out, and evergreen NAV-based fees — three-quarters of FY2026's growth — would reset lower if the 2025 exit-and-secondaries rebound reverses. That durability question is the pivot on which this valuation turns, and it is the single most important thread left for the next writer.

What would change the read toward "cheap": incentive-fee and FRPR contribution stabilizing rather than falling, evergreen net subscriptions holding through a down market, and fee-earning AUM growth reaccelerating from the high-single digits. What would confirm the bear: another leg of incentive-fee weakness, evergreen redemptions or gates, and the blended fee rate rolling over. At 13x forward, the price already carries a good deal of that bad news — but not the worst of it.