HRB

H.& R.Block Inc

Finance/Real Estate, Consumer


Presented:06/13/2016
Price:$23.79
Cap:$5.32B
Current Price:$60.80
Cap:$8.49B

Presented

Date06/13/2016
Price$23.79
Market Cap$5.32B
Ent Value$5.03B
P/E Ratio12.7x
Book Value$0.11
Div Yield0%
Shares O/S223.62M
Ave Daily Vol4,322,708
Short Int9.88%

Current

Price$60.80
Market Cap$8.49B
H&R Block, Inc. provides tax preparation and banking services. The company operates its business through three segments: Tax Services, Corporate & Eliminations and Identifiable Assets. The Tax Services segment provides tax return preparation and related services and products in the U.S. and its territories, Canada, and Australia. The Corporate and Eliminations segment includes net interest margin and gains or losses relating to mortgage loans for investment, real estate and residual interests in securitizations, along with interest expense on borrowings, other corporate expenses and eliminations of intercompany activities. The Identifiable Assets segment includes goodwill and intangible assets, associated with each. H&R Block was founded by Henry W. Bloch and Richard L. Bloch on January 25, 1955 and is headquartered in Kansas City, MO.

Publicly traded companies mentioned herein: H&R Block Inc (HRB), Intuit Inc (INTU), Liberty Tax Inc (TAX)

Highlights

The presenter is bearish on the outlook for H&R Block (HRB) and thinks this past Friday’s 12% gain (to ~$24; 6/10/16) following its Q4 2016 earnings announcement has provided for an attractive entry point. The stock recently declined from the mid-$30s to the present level “by way of $20”, and the overarching pressure on the business should limit upside risk and send shares lower. HRB’s main issue is pricing, as the management team – led by President & CEO William Cobb - thought the customer base was insensitive to pricing and would use the company’s tax services regardless of slightly higher costs; however, he said it has become apparent that demand is more elastic than it was originally thought. The do it yourself (DIY) market continues to grow and independent tax preparers have taken meaningful share of the assisted (DIFM) market, and HRB has not communicated a reasonable plan to mitigate the risk of further losses. In the presenter’s opinion, HRB’s service is roughly 25% overpriced, and a meaningful reset is the only way to [potentially] address the issue.

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Idea Discussion

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