HRB has been written up multiple times here. It is the largest tax prep services company in the US. The business has been flat for a while, but is a solid cash flow generator. In 2019, the company did $3.1 bn in revenue with $800m of EBITDA and $511m of cash flow. At $20 per share, the company is trading at 10x EPS.
Management is disciplined and has been very accurate in their projections / able to hit them.
Revenue has been flat, but highly consistent at $3.0-3.1bn over the last 5 years.
Modest amount of leverage, especially relative to the consistent earnings.
I expect a 25% return over the next year. 5% of that will come from the current dividend. 20% will come from price increasing to pre-COVID19 levels.
HRB has repurchased 13% of its float between 2017-2019 at an average price of $23. This is 15% above the current stock price.
The 20% price drop recently is unwarranted as it’s largely driven by general market movement. HRB’s operations will likely see little to no impact of the virus.
The revenue from assisted returns accounts for 60.07% of all of H&R Block's revenue. There has been a consistent small volume decline.
The DIY segment is growing. The largest competitor in the DIY tax return space is TurboTax. Looking at Intuit's 2019 year-end filing we can see the difference in scale of the segments. TurboTax creates revenue of $2.775 Billion for Intuit while H&R Block's DIY segment creates revenue of $260 Million. That means TurboTax as a whole is over 10x larger than H&R Block's DIY segment. Also just to note TurboTax has seen revenue growth of 11% over the past year while H&R Block DIY has had 7%.
Total Assisted Returns Vol.
Assisted Returns Revenue
HRB might not be a stock you'd stay in for 10 years, but in the short-term, it offers a solid 25% upside.
I do not hold a position with the issuer such as employment, directorship, or consultancy. I and/or others I advise do not hold a material investment in the issuer's securities.
General market sentiment turning with COVID19 fears subsiding. And investors appreciating more a solid dividend yield in light of recent interest rate drop.