Shares of H&R Block, Inc. HRB have gained 13.5% year to date, outperforming the 9.3% rally of the industry it belongs to.
With a long-term expected EPS growth rate of 10% and a market cap of $5.9 billion, H&R Block seems to be a stock that investors should retain in their portfolios.
Factors That Bode Well
In its assisted business, H&R Block remains focused on investment in price decrease, developing and delivering on a clear brand promise and enhancing the quality service delivery.
In the DIY business, the company continues focusing on competitive pricing and investment in product innovation and user experience improvement. It has enhanced experience for mobile users, and utilized data and machine learning to make its products smarter and more personalized. It made improvements in price transparency through launching DIY Price Preview.
The company’s virtual products — Tax Pro Go, Tax Pro Review and Ask a Tax Pro — offer customers modern solutions in tax preparation, placing it in a better position to attract and retain customers.
The recent acquisition of Canadian accounting software firm Wave Financial will expand 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.
Despite riding on significant growth prospects, H&R Block is not free from overhangs. The company is witnessing escalation in costs stemming from heavy investments. It faces huge litigations in connection with its various operating activities that drain resources and hamper goodwill. Nevertheless, we believe that prudent investments will drive H&R Block’s growth in the long run.
Zacks Rank & Stocks to Consider
H&R Block currently carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader Zacks Business Services sector are FLEETCOR Technologies FLT, Global Payments GPN and NV5 Global NVEE, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term expected EPS (three to five years) growth rate for FLEETCOR, Global Payments and NV5 Global is 15.4%, 16.9% and 20%, respectively.
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