H&R Block, Inc. (HRB) | Investment Case

1. Company Snapshot

1.a. Company Description

H&R Block, Inc., through its subsidiaries, provides assisted income tax return preparation and do-it-yourself (DIY) tax return preparation services and products to the general public primarily in the United States, Canada, and Australia.The company offers assisted income tax return preparation and related services through a system of retail offices operated directly by the company or its franchisees.It also provides Refund Transfers and H&R Block Emerald Prepaid Mastercard, which enables clients to receive their tax refunds; Peace of Mind extended service plans; H&R Block Emerald Advance lines of credit; Tax Identity Shield that provides clients assistance in helping protect their tax identity and access to services to help restore their tax identity; refund advance loans; H&R Block Instant Refund; and H&R Block Pay With Refund services.

In addition, the company offers small business financial solutions through its company-owned or franchise offices, and online.H&R Block, Inc.was founded in 1955 and is headquartered in Kansas City, Missouri.

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1.b. Last Insights on HRB

H&R Block's recent 3-month performance was negatively driven by its Q4 earnings miss, with EPS of $2.27 per share, below the Zacks Consensus Estimate of $2.81 per share. The company's FY26 adjusted EPS guidance also fell short of estimates, prompting analysts to lower their forecasts. Additionally, weaker financial services performance offset tax preparation gains, contributing to the negative sentiment.

1.c. Company Highlights

Last Price	42.28
Change Percentage	0.50%
Open	41.87
Previous Close	42.07
Market Cap ( Millions)	5652
Volume	427039
Year High	64.62
Year Low	41.38
M A 50	48.34
M A 200	53.32

FCF Yield	10.19%
Dividend Yield	3.76%
ROE	-204.49%
Debt / Equity	-407.71%
Net Debt / EBIDTA	188.11%
Price To Book	-10.1
Price Earnings Ratio	9.08
Price To FCF	9.81
Price To sales	1.5
EV / EBITDA	7.57

2. H&R Block's Strong Q1 Performance Driven by Revenue Growth and Strategic Investments

H&R Block reported a 5% revenue growth in the first quarter of fiscal 2026, accompanied by a 9.4% improvement in EBITDA compared to the prior year. The company's earnings per share (EPS) came in at '-1.2', beating estimates of '-1.4'. The strong financial performance was driven by early results in assisted consumer tax, small business tax, and Wave. The company returned approximately $455 million in capital to shareholders during the quarter, completing its share repurchase plan for fiscal 2026 and retiring around 6% of its shares outstanding.

Publication Date: Nov -13

                                    📋 Highlights
                                    Revenue & EBITDA Growth:
                                                Achieved 5% revenue growth and a 9.4% EBITDA improvement YoY for fiscal Q1 2026.
Shareholder Returns:
                                                Returned $455 million in capital, completing the fiscal 2026 share repurchase plan and retiring 6% of shares outstanding.
AI & Productivity Focus:
                                                Curtis Campbell emphasized leveraging AI and tech investments to enhance customer experience and operational efficiency, including tools like AI Tax Assist.
Market Strategy Shift:
                                                Targeting complex paid filers with stronger loyalty, while preparing for a 20 basis point shift from DIY to assisted filings due to tax bill complexity.
Future Pricing & Share Loss Mitigation:
                                                Plans for low single-digit price increases across channels and investing in Second Look and AI to reduce share losses in assisted tax services.

                                

Strategic Focus on Complex Paid Filers and Innovation

Curtis Campbell, the CEO-elect, highlighted the company's focus on more complex paid filers who demonstrate stronger loyalty. He emphasized the importance of leveraging technology and AI to improve the customer experience, increase efficiency, and drive productivity improvements throughout the organization. The company's unique combination of trusted human expertise and forward-thinking innovation is expected to set it apart from competitors, as seen in initiatives like AI Tax Assist.

Preparing for Increased Complexity and Competition

The company is preparing for increased complexity due to the new tax bill, which is expected to drive assisted usage. H&R Block is cautiously optimistic about the impact of the tax bill, using the 20 basis points shift from DIY to assisted business last tax season as a proxy. The company's pricing strategy for the upcoming season is consistent with prior years, expecting to take low single-digit price increases across both channels.

Valuation and Growth Prospects

With a P/S Ratio of 1.63 and an EV/EBITDA of 1765.78, the company's valuation appears to be influenced by its growth prospects. Analysts estimate next year's revenue growth at 4.3%. The company's ROE is currently at -0.44%, while the ROIC stands at 39.42%. The Dividend Yield is 3.36%, indicating a relatively stable return for shareholders. The company's ability to navigate potential disruptions and its focus on innovation will be crucial in driving future growth.

Future Outlook and Challenges

The company's plans to stem share losses in the assisted business by investing in Second Look and AI will be closely watched. The government shutdown's potential impact on the start of the tax season is a risk, but H&R Block has built a playbook to navigate potential disruptions. The company's close relationship with the government and states positions it well to ensure clients receive the best outcomes.

3. NewsRoom

H&R Block: High Yield, High Uncertainty In An AI-Driven Future

Dec -02

Source: seekingalpha.com

H&R Block, Inc. $HRB Shares Sold by Franklin Resources Inc.

Dec -01

Source: defenseworld.net

Goldman Sachs Spotlights Dividend Stocks Using AI – 5 Strong Buys Now

Nov -26

Source: 247wallst.com

Analysts Set H&R Block, Inc. (NYSE:HRB) PT at $55.00

Nov -25

Source: defenseworld.net

These Companies Will Benefit from AI the Most—or Die Trying

Nov -19

Source: barrons.com

Aviva PLC Purchases New Position in H&R Block, Inc. $HRB

Nov -14

Source: defenseworld.net

Down 10.2% in 4 Weeks, Here's Why You Should You Buy the Dip in H&R Block (HRB)

Nov -13

Source: zacks.com

H&R Block Stock Declines 3.5% Since Reporting Fiscal Q1 Loss

Nov -10

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.35%)

6. Segments

Assisted Tax Preparation

Expected Growth: 2.5%

H&R Block's Assisted Tax Preparation growth is driven by increasing demand for professional tax services, expansion into new markets, and strategic partnerships. Additionally, the company's investment in digital transformation and customer experience enhancements are attracting new clients and increasing retention rates, contributing to a 2.5% growth rate.

Do It Yourself Tax Preparation

Expected Growth: 1.8%

The 1.8% growth of H&R Block's DIY tax preparation segment is driven by increasing consumer adoption of digital tax filing, expansion of online services, and strategic marketing efforts. Additionally, the rise of gig economy and self-employment has led to more individuals seeking DIY tax solutions, contributing to the segment's growth.

International

Expected Growth: 2.2%

H&R Block's international segment growth of 2.2% is driven by increasing demand for digital tax preparation services, expansion into new markets, and strategic partnerships. Additionally, the company's efforts to enhance its online platform and mobile app have improved customer experience, leading to increased adoption and retention rates.

Royalties

Expected Growth: 1.5%

The 1.5% growth in royalties from H&R Block, Inc. is driven by increasing demand for tax preparation services, expansion of digital platforms, and strategic partnerships. Additionally, the rise of the gig economy and self-employment has led to more individuals seeking tax filing services, contributing to the growth in royalties.

Refund Transfers

Expected Growth: 2.8%

The 2.8% growth in Refund Transfers from H&R Block, Inc. is driven by increasing demand for tax preparation services, expansion of digital platforms, and strategic partnerships. Additionally, the rise of the gig economy and self-employment has led to more individuals seeking refund transfer services. Furthermore, H&R Block's efforts to improve customer experience and enhance its refund transfer process have contributed to the growth.

Peace of Mind Extended Service Plan

Expected Growth: 2.1%

The 2.1% growth of Peace of Mind Extended Service Plan from H&R Block, Inc. is driven by increasing demand for tax preparation services, expansion of digital platforms, and strategic partnerships. Additionally, the plan's comprehensive coverage and customer loyalty programs contribute to its growth, as clients seek protection against tax-related issues and audit representation.

Wave

Expected Growth: 3.0%

Wave's 3.0 growth is driven by increasing adoption of digital tax preparation solutions, expansion into adjacent markets such as bookkeeping and payroll services, and strategic partnerships with financial institutions. Additionally, Wave's focus on serving small businesses and self-employed individuals, a growing demographic, contributes to its growth momentum.

Emerald Card and Spruce

Expected Growth: 2.4%

The 2.4% growth of Emerald Card and Spruce from H&R Block, Inc. is driven by increasing adoption of digital tax preparation services, expansion of financial product offerings, and strategic partnerships. Additionally, the growing demand for mobile banking and digital payment solutions, as well as the company's efforts to enhance user experience and expand its customer base, contribute to this growth.

Interest and Fee Income on Emerald Advance

Expected Growth: 1.9%

The 1.9% growth in Interest and Fee Income on Emerald Advance from H&R Block, Inc. is driven by increased adoption of digital tax preparation services, expansion of financial products offerings, and strategic partnerships. Additionally, the rise of gig economy and self-employment has led to higher demand for tax-related financial services, contributing to the growth.

Other

Expected Growth: 2.0%

H&R Block's 'Other' segment growth is driven by increased demand for financial products and services, expansion of financial services to underserved markets, and strategic partnerships. Additionally, the company's investments in digital transformation and customer experience enhancements have contributed to the 2.0% growth.

Tax Identity Shield

Expected Growth: 2.6%

The 2.6% growth of Tax Identity Shield from H&R Block, Inc. is driven by increasing demand for identity theft protection, expansion of digital tax preparation services, and strategic partnerships. Additionally, the rise of online tax filing and growing awareness of tax-related identity theft contribute to the segment's growth.

7. Detailed Products

Tax Preparation Services

H&R Block offers in-person and online tax preparation services, including filing of federal, state, and local taxes.

Tax Audit Representation

H&R Block provides representation services for clients audited by the IRS, including audit preparation and response.

Bookkeeping and Accounting Services

H&R Block offers bookkeeping and accounting services for small businesses, including financial statement preparation and budgeting.

Payroll Services

H&R Block provides payroll processing services, including payroll tax compliance and employee benefits administration.

Financial Products and Services

H&R Block offers a range of financial products and services, including refund anticipation loans and prepaid debit cards.

Tax Identity Shield

H&R Block's Tax Identity Shield provides identity theft protection and restoration services for taxpayers.

Online Tax Filing

H&R Block offers online tax filing services, including free filing options for simple returns.

8. H&R Block, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

H&R Block's services are specialized and require expertise, making it difficult for substitutes to emerge.

Bargaining Power Of Customers

Customers have some bargaining power due to the availability of alternative tax preparation services, but H&R Block's brand recognition and convenience mitigate this power.

Bargaining Power Of Suppliers

H&R Block has a diverse supplier base, and its suppliers have limited bargaining power due to the company's large scale and negotiating power.

Threat Of New Entrants

While there are barriers to entry in the tax preparation industry, new entrants can still emerge, especially with the rise of digital tax preparation services.

Intensity Of Rivalry

The tax preparation industry is highly competitive, with many established players and new entrants vying for market share.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	98.37%
Debt Cost	4.77%
Equity Weight	1.63%
Equity Cost	7.47%
WACC	4.82%
Leverage	6034.52%

11. Quality Control: H&R Block, Inc. passed 5 out of 9 key points

Strong Liquidity

Low Debt

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Dillard's

A-Score: 6.9/10

Value: 5.1

Growth: 6.9

Quality: 7.1

Yield: 8.0

Momentum: 9.5

Volatility: 5.0

1-Year Total Return ->

H&R Block

A-Score: 5.8/10

Value: 5.6

Growth: 6.1

Quality: 5.5

Yield: 7.0

Momentum: 1.5

Volatility: 9.0

1-Year Total Return ->

Rollins

A-Score: 5.8/10

Value: 0.7

Growth: 7.1

Quality: 7.5

Yield: 2.0

Momentum: 7.5

Volatility: 9.7

1-Year Total Return ->

SCI

A-Score: 5.7/10

Value: 3.5

Growth: 6.4

Quality: 4.7

Yield: 4.0

Momentum: 6.0

Volatility: 9.3

1-Year Total Return ->

Frontdoor

A-Score: 5.2/10

Value: 3.5

Growth: 6.7

Quality: 6.6

Yield: 0.0

Momentum: 8.0

Volatility: 6.7

1-Year Total Return ->

Bright Horizons Family Solutions

A-Score: 3.7/10

Value: 2.5

Growth: 6.0

Quality: 5.5

Yield: 0.0

Momentum: 2.5

Volatility: 5.7

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

-7.07%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

4.82%

H&R Block, Inc. - US0936711052

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on HRB

1.c. Company Highlights

Strong Momentum

Higher Yield

Less Volatile

Earnings Beats

Revenues Beats

Better Quality

Earnings Miss

Medium Volatility

Revenues Miss

Average Growth

Stable Momentum

Weak Momentum

2. H&R Block's Strong Q1 Performance Driven by Revenue Growth and Strategic Investments

Strategic Focus on Complex Paid Filers and Innovation

Preparing for Increased Complexity and Competition

Valuation and Growth Prospects

Future Outlook and Challenges

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.35%)

6. Segments

Assisted Tax Preparation

Expected Growth: 2.5%

Do It Yourself Tax Preparation

Expected Growth: 1.8%

International

Expected Growth: 2.2%

Royalties

Expected Growth: 1.5%

Refund Transfers

Expected Growth: 2.8%

Peace of Mind Extended Service Plan

Expected Growth: 2.1%

Wave

Expected Growth: 3.0%

Emerald Card and Spruce

Expected Growth: 2.4%

Interest and Fee Income on Emerald Advance

Expected Growth: 1.9%

Other

Expected Growth: 2.0%

Tax Identity Shield

Expected Growth: 2.6%

7. Detailed Products

Tax Preparation Services

Tax Audit Representation

Bookkeeping and Accounting Services

Payroll Services

Financial Products and Services

Tax Identity Shield

Online Tax Filing

8. H&R Block, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: H&R Block, Inc. passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA