U.S. Markets close in 5 hrs 2 mins

H&R Block (HRB) Snaps Up Wave Financial for $405 million

Zacks Equity Research

H&R Block, Inc. HRB announced yesterday that it has agreed to acquire Canadian accounting software firm Wave Financial Inc.

Wave provides accounting, invoicing, payroll, payments and bookkeeping solutions and services, built into a comprehensive platform. It serves more than 400,000 small businesses across 200 countries.

H&R Block will buy all outstanding shares of Wave for $405 million in cash. The transaction is expected to be completed in the next few months.

After completion of the acquisition, Wave will maintain its leadership team and continue to function independently within H&R Block from its Toronto headquarters.

We observe that HRB shares have gained 14.4% over the past year against the 27.1% decline of the industry it belongs to.

A Strategic Fit With Complementary Product Lines

The buyout will enlarge H&R Block’s product and client portfolio and strengthen its position in the large and expanding small business market. Wave’s low customer acquisition costs and disruptive pricing model will help H&R Block gain edge over competitors and fasten organic growth.

H&R Block, Inc. EPS Diluted (TTM)

H&R Block, Inc. EPS Diluted (TTM)

H&R Block, Inc. eps-diluted-ttm | H&R Block, Inc. Quote

Jeff Jones, president and CEO of H&R Block stated, “Wave provides us the opportunity to accelerate our small business strategy and is a great strategic fit, as both companies can leverage each other's capabilities to bring tax and financial solutions to small business owners, serving more clients in more ways.”

Based on the anticipated time of closure, H&R Block expects the acquisition to generate $40 to $45 million of revenue for fiscal 2020.

Zacks Rank & Stocks to Consider

H&R Block currently carries a Zacks Rank #4 (Sell).

A few better-ranked stocks in the broader Zacks Business Services sector are Navigant Consulting NCI, FLEETCOR Technologies FLT and NV5 Global NVEE. While Navigant Consulting sports a Zacks Rank #1 (Strong Buy), FLEETCOR and NV5 Global carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term expected EPS (three to five years) growth rate for Navigant Consulting, FLEETCOR and NV5 Global is 13.5%, 15.4% and 20%, respectively.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
FleetCor Technologies, Inc. (FLT) : Free Stock Analysis Report
Navigant Consulting, Inc. (NCI) : Free Stock Analysis Report
NV5 Global, Inc. (NVEE) : Free Stock Analysis Report
H&R Block, Inc. (HRB) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research