H&R Block
HRB
$50.96
+0.08%
H&R Block, Inc. is a leading provider of income tax return preparation services, digital do-it-yourself tax solutions, and related financial services, operating primarily in the United States, Canada, and Australia. As a dominant player in the assisted tax preparation market, H&R Block differentiates itself through its extensive network of company-owned and franchise offices, complemented by its online tax software. The current investor narrative centers on the company's robust cash generation, aggressive share repurchases, and a 10% dividend increase, which have recently driven the stock to new highs and attracted income-focused investors. Additionally, the market is closely watching H&R Block's strategic pivot towards digital solutions and its ability to sustain growth amid evolving tax preparation trends.…
HRB
H&R Block
$50.96
Related headlines
Investment Opinion: Should I buy HRB Today?
Rating: Hold. H&R Block offers a compelling value proposition with a forward PE of 7.77 and a PEG of 0.24, but the negative operating margin and high leverage warrant caution. The consensus analyst rating is 'hold' with an average target price of $50.67, implying a -5.6% downside from the current price of $53.68. This suggests the stock is fairly valued to slightly overvalued at current levels.
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HRB 12-Month Price Forecast
The AI assessment is neutral with medium confidence. The stock's valuation metrics (PEG 0.24, forward PE 7.77) indicate it is undervalued, but the negative operating margin and high leverage introduce significant risks. The recent price surge may have priced in near-term positives, leaving limited upside. The stance would upgrade to bullish if the operating margin turns positive and revenue growth accelerates above 10%. Conversely, a downgrade to bearish would occur if the dividend is cut or the debt-to-equity ratio worsens.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on H&R Block's 12-month outlook, with a consensus price target around $50.67 and implied upside of -0.6% versus the current price.
Average Target
$50.67
0 analysts
Implied Upside
-0.6%
vs. current price
Analyst Count
—
covering this stock
Price Range
$33 - $60
Analyst target range
The low target of $33.00 may reflect concerns about competitive pressures or a potential slowdown in the tax preparation industry, while the high target of $60.00 assumes continued strong cash generation and successful execution of digital initiatives. The consensus 'hold' rating suggests that analysts are neutral on the stock, acknowledging its strengths but also noting potential risks. With only 3 analysts covering the stock, there is limited coverage, which can lead to higher volatility and less efficient price discovery. Investors should consider this limited coverage when making investment decisions.
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Bulls vs Bears: HRB Investment Factors
H&R Block presents a mixed picture: strong cash generation, attractive dividend, and compelling valuation metrics (PEG 0.24, forward PE 7.77) are countered by a negative operating margin, high leverage, and limited analyst coverage. The recent price surge of 76.64% in 6 months reflects improving sentiment, but the stock's 1-year underperformance versus the market indicates persistent challenges. Currently, the bull case has stronger evidence due to the stock's undervaluation and robust cash returns, but the key tension is whether the negative operating margin is a temporary anomaly or a structural issue. If margins improve, the stock could re-rate higher; if not, the high leverage and premium valuation could lead to a sharp correction.
Bullish
- Undervalued with PEG of 0.24: The PEG ratio of 0.24x is significantly below 1, indicating the stock is undervalued relative to its earnings growth. This suggests the market is pricing in limited growth, providing a margin of safety for investors.
- Strong momentum and relative strength: The stock has surged 76.64% over the past 6 months and 35.73% in the last month, with relative strength of 65.57% vs. the S&P 500 over 6 months. This momentum reflects improving investor sentiment and operational execution.
- High profitability with net margin of 18.59%: Despite a negative operating margin of -32.66%, the net margin is a robust 18.59%, indicating effective cost management and strong bottom-line profitability. This supports the company's ability to generate cash.
- Attractive dividend yield of 4.36%: The dividend yield of 4.36% is well above the market average, and the recent 10% dividend increase underscores management's confidence in cash flow. This makes HRB appealing for income-focused investors.
Bearish
- Negative operating margin of -32.66%: The operating margin is deeply negative, which may indicate operational inefficiencies or one-time charges. This raises concerns about the sustainability of profitability if such issues persist.
- High debt-to-equity ratio of 17.89: The debt-to-equity ratio of 17.89 is extremely high, suggesting significant leverage. This increases financial risk, especially if interest rates rise or cash flows weaken.
- Limited analyst coverage with hold rating: Only 3 analysts cover the stock, and the consensus is 'hold' with a mean rating of 3.2. Limited coverage can lead to inefficiencies and higher volatility, while the hold rating suggests no strong conviction.
- High valuation on price-to-book of 41.16: The price-to-book ratio of 41.16 is extremely elevated, indicating the market is paying a premium for the company's book value. This could lead to significant downside if growth expectations are not met.
HRB Technical Analysis
H&R Block's stock is in a strong uptrend, with a 1-year price change of +4.58% and a 6-month change of +76.64%, indicating significant momentum. The current price of $53.68 is near the upper end of its 52-week range, sitting at approximately 91.5% of the range (calculated as (53.68 - 28.16) / (58.67 - 28.16) * 100). This positioning near the highs suggests bullish sentiment and potential overextension, but also reflects strong underlying momentum.
Beta
0.35
0.35x market volatility
Max Drawdown
-48.8%
Largest decline past year
52-Week Range
$28-$59
Price range past year
Annual Return
+1.2%
Cumulative gain past year
| Period | HRB Return | S&P 500 |
|---|---|---|
| 1m | +12.8% | +1.0% |
| 3m | +36.0% | +1.1% |
| 6m | +58.0% | +13.8% |
| 1y | +1.2% | +19.5% |
| ytd | +19.6% | +12.2% |
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HRB Fundamental Analysis
H&R Block's revenue trajectory shows resilience, with the most recent quarterly revenue estimated at $4.52 billion (based on analyst estimates), reflecting a stable business model. The company's gross margin stands at 44.33%, indicating solid profitability in its core tax preparation services. However, the operating margin is negative at -32.66%, which is unusual and may be due to seasonal factors or one-time charges, but the net margin is positive at 18.59%, showing that the company is profitable after all expenses.
Quarterly Revenue
N/A
N/A
Revenue YoY Growth
N/A
YoY Comparison
Gross Margin
N/A
Latest Quarter
Free Cash Flow
N/A
Last 12 Months
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Valuation Analysis: Is HRB Overvalued?
Given that H&R Block has positive net income, the primary valuation metric selected is the price-to-earnings (PE) ratio. The trailing PE is 6.59x, while the forward PE is 7.77x, indicating that the market expects earnings to grow slightly in the future. The gap between trailing and forward PE is modest, suggesting stable earnings expectations. The PEG ratio of 0.24x implies that the stock is undervalued relative to its growth rate, making it an attractive value proposition.
PE
6.6x
Latest Quarter
vs. Historical
N/A
5-Year PE Range 17x~59x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
6.4x
Enterprise Value Multiple
Investment Risk Disclosure
Financial & Operational Risks: H&R Block's financial health is strained by a debt-to-equity ratio of 17.89, indicating heavy reliance on debt financing. This leverage amplifies the impact of any earnings shortfall, especially given the negative operating margin of -32.66%, which suggests operational inefficiencies or one-time charges. The company's cash flow generation is critical to service this debt, and any disruption in tax season revenue could lead to liquidity issues. Additionally, the payout ratio of 28.76% and dividend yield of 4.36% commit the company to significant cash outflows, which may limit flexibility in downturns.
