H&R Block (HRB) AI Stock Analysis

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H&R Block

(NYSE:HRB)

61Neutral

H&R Block's stable financial performance is overshadowed by high leverage and flat revenue growth. Technical indicators show limited momentum. Valuation appears reasonable, and strategic focus on digital tools is promising, but challenges in operating expenses and loan volume persist.

Positive Factors

Guidance Confidence

Full-year guidance was reaffirmed, indicating confidence in the company's future performance.

Valuation

The stock is trading at a discount compared to both its five-year average and its industry peers, suggesting potential for price appreciation.

Negative Factors

Profitability Concerns

The adjusted loss per share increased 36.2% from the previous year, indicating a decline in profitability.

Revenue Performance

Revenues were flat year-over-year in the second quarter, slightly below estimates.

H&R Block (HRB) vs. S&P 500 (SPY)

Market Cap

$8.22B

Dividend Yield2.35%

Average Volume (3M)2.01M

Price to Earnings (P/E)16.9

Beta (1Y)0.27

Revenue Growth3.77%

EPS Growth-2.16%

CountryUS

Employees4,200

SectorConsumer Cyclical

Sector Strength63

IndustryPersonal Products & Services

Share Statistics

EPS (TTM)3.63

Shares Outstanding133,849,260

10 Day Avg. Volume1,931,616

30 Day Avg. Volume2,005,739

Financial Highlights & Ratios

PEG Ratio0.96

Price to Book (P/B)N/A

Price to Sales (P/S)1.94

Price to Cash Flow (P/CF)-3.10

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$70.00

Price Target Upside11.06% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering1

H&R Block Business Overview & Revenue Model

Company DescriptionH&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.

How the Company Makes MoneyH&R Block generates revenue primarily through its tax preparation services, which are offered via a network of company-owned and franchise retail locations, as well as its digital platforms. The company earns fees for preparing and filing tax returns for individuals and small businesses. Additionally, H&R Block offers complementary financial products and services, including refund transfer services, which allow clients to pay for their tax preparation fees out of their tax refund, and refund advance loans, which provide clients with early access to their anticipated tax refunds for a fee. Beyond these services, H&R Block generates income from its small business solutions, which include bookkeeping and payroll services. The company also benefits from strategic partnerships and collaborations with financial institutions to offer a broader range of financial products to its clients, enhancing its revenue streams.

H&R Block Financial Statement Overview

Summary

H&R Block demonstrates stable revenue and profit margins, but high leverage and negative equity position pose financial stability risks. Cash flow is stable, with room for growth in free cash flow.

Income Statement

Positive

H&R Block shows a stable revenue growth, with a slight increase from the previous year. The company maintains a healthy gross profit margin and a consistent net profit margin. However, the EBIT margin has slightly decreased compared to the previous period, suggesting potential challenges in operational efficiency.

Balance Sheet

Neutral

The balance sheet reveals a high debt-to-equity ratio due to negative stockholders' equity in the latest TTM data, indicating a highly leveraged position. This could pose financial risks if not managed properly. The equity ratio is also negative, reflecting the company's reliance on debt financing.

Cash Flow

Positive

H&R Block's cash flow is stable, with a slight increase in free cash flow from the previous year. The operating cash flow to net income ratio is strong, indicating efficient cash generation relative to income. However, the free cash flow to net income ratio shows limited growth, suggesting potential constraints in cash flow expansion.

TTM	Jun 2024	Jun 2023	Jun 2022	Jun 2021	Jun 2020
Breakdown
Income Statement		Total Revenue
3.62B	3.61B	3.47B	3.46B	3.41B	2.64B
	Gross Profit
1.62B	1.62B	2.14B	2.16B	1.57B	927.44M
	EBIT
783.27M	805.28M	784.19M	747.35M	775.61M	198.72M
	EBITDA
929.95M	963.19M	914.69M	889.53M	932.46M	368.26M
	Net Income Common Stockholders
586.22M	595.32M	553.70M	553.67M	583.79M	-7.53M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
959.75M	1.05B	986.98M	885.01M	934.25M	2.66B
	Total Assets
4.31B	3.22B	3.07B	3.27B	3.65B	5.11B
	Total Debt
2.09B	1.49B	1.93B	1.92B	1.94B	4.00B
	Net Debt
1.13B	437.77M	947.93M	1.04B	1.00B	1.34B
	Total Liabilities
3.43B	3.13B	3.04B	3.06B	3.30B	5.04B
	Stockholders Equity
879.80M	90.59M	32.06M	211.63M	352.40M	71.04M
Cash Flow		Free Cash Flow
657.77M	657.18M	752.14M	746.58M	573.14M	27.28M
	Operating Cash Flow
727.27M	720.86M	821.84M	808.54M	625.93M	108.96M
	Investing Cash Flow
-96.36M	-93.86M	-101.39M	-76.54M	-45.52M	-470.23M
	Financing Cash Flow
-653.56M	-564.31M	-750.99M	-1.26B	-2.41B	1.53B

H&R Block Technical Analysis

Technical Analysis Sentiment

Positive

Last Price63.03

Price Trends

50DMA

53.98

Positive

100DMA

54.43

Positive

200DMA

56.75

Positive

Market Momentum

MACD

2.03

Negative

RSI

77.45

Negative

STOCH

95.71

Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HRB, the sentiment is Positive. The current price of 63.03 is above the 20-day moving average (MA) of 56.02, above the 50-day MA of 53.98, and above the 200-day MA of 56.75, indicating a bullish trend. The MACD of 2.03 indicates Negative momentum. The RSI at 77.45 is Negative, neither overbought nor oversold. The STOCH value of 95.71 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for HRB.

H&R Block Risk Analysis

H&R Block disclosed 23 risk factors in its most recent earnings report. H&R Block reported the most risks in the “Legal & Regulatory” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

H&R Block Peers Comparison

Overall Rating

UnderperformOutperform

Sector (60)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SCI	76 Outperform	$11.24B	22.08	32.22%	1.56%	2.11%	0.05%
BFAM	70 Outperform	$6.73B	48.86	11.26%	―	11.07%	88.57%
CSV	68 Neutral	$608.83M	18.44	17.04%	1.16%	6.17%	-2.98%
MCW	67 Neutral	$2.35B	33.94	7.34%	―	7.30%	-14.92%
FTDR	65 Neutral	$2.98B	13.24	125.33%	―	3.48%	43.98%
HRB	61 Neutral	$8.22B	16.91	657.13%	2.35%	3.77%	-2.16%
Sector *	60 Neutral	$7.23B	11.55	3.67%	4.04%	2.96%	-13.54%

* Consumer Cyclical Sector Average

Performance Comparison

HRB

H&R Block

63.03

17.64

38.86%

CSV

Carriage Services

38.80

15.55

66.88%

SCI

Service International

76.65

9.44

14.05%

BFAM

Bright Horizons

116.72

13.00

12.53%

FTDR

frontdoor

39.06

9.05

30.16%

MCW

Mister Car Wash

7.09

0.42

6.30%

H&R Block Earnings Call Summary

Earnings Call Date: Feb 4, 2025 | % Change Since: 16.61% | Next Earnings Date: May 13, 2025

Earnings Call Sentiment Neutral

The earnings call presented a mixed picture with several positive developments in small business growth, Wave revenue, and the Spruce platform balanced by challenges such as flat revenue growth, increased operating expenses, and a decline in Emerald Advance loan volume.

Highlights

Small Business Growth

Assisted small business tax delivered strong revenue growth with double-digit revenue growth year-over-year in bookkeeping and payroll services.

Wave Revenue Increase

Wave achieved revenue growth of 15% in the quarter, driven by strong adoption of high-margin subscription products.

Spruce Platform Success

Spruce, the mobile banking platform, saw a 55% increase in sign-ups compared to the prior year, with customer deposits more than doubling.

AI Tax Assist Enhancement

The AI Tax Assist tool was significantly expanded, leading to greater conversion among new clients.

Strategic Capital Allocation

Share repurchase program was highlighted, buying back $190 million in the quarter, totaling 5% of the float for the year.

Lowlights

Flat Revenue Growth

Total revenue was flat year-over-year due to lower Emerald Advance volume.

Increase in Operating Expenses

Total operating expenses increased by 6% due to higher wages, increased healthcare costs, and occupancy costs.

Emerald Advance Loan Volume Decline

Lower interest and fee income on Emerald Advance due to a decrease in loan volume.

Second Quarter Loss

Pretax loss in the second quarter was $312 million, compared to $283 million in the prior year.

Company Guidance

During H&R Block's second quarter fiscal year 2025 earnings call, management provided several key metrics and guidance. Total revenue for the quarter was flat year-over-year at $179 million, impacted by lower Emerald Advance volume. However, the company saw strong performance in small business services with double-digit revenue growth. H&R Block repurchased $190 million in shares, bringing total repurchases to nearly 5% of the float. The company reaffirmed its fiscal 2025 outlook, expecting revenue between $3.69 billion and $3.75 billion, and EBITDA between $975 million and $1.02 billion. Additionally, H&R Block highlighted a lower effective tax rate of approximately 13% for the fiscal year. The company emphasized its strategic focus on small business services, financial products, and enhancing client experiences with digital tools, including the expansion of its AI Tax Assist tool.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.