H&R Block, Inc.’s HRB shares have gained 36.4% in the past six months compared with 26.4% increase of the industry it belongs to.
With a long-term expected growth rate of 12.5% and a market cap of $3.7 billion, H&R Block seems to be a stock that investors should retain in their portfolios.
Key Growth Drivers
H&R Block looks well poised to gain from opportunities offered by growing tax industry in both assisted and DIY channels. In the DIY business, the company continues to focus on competitive pricing and investment in product innovation and user experience improvement.
We believe the main drivers of the company’s performance post the pandemic will be digital enablement of business, client addition and retention in both Assisted and DIY, greater usage of AI, and machine learning for product improvement as well as expansion in small business.
H&R Block has a debt-laden balance sheet. Total debt at the end of third-quarter fiscal 2021 was $2.4 billion, up from $1.55 billion at the end of the prior quarter. Further, the company’s cash and cash equivalent of $461 million at the end of third quarter fiscal was well below this debt level, underscoring that the company doesn’t have enough cash to meet this debt burden.
Total debt to total capital ratio of 1.29 is higher than the previous quarter’s level of 1.21 and the industry’s 0.78. A high debt-to-capitalization ratio indicates higher risk of insolvency in challenging times.
Zacks Rank and Stocks to Consider
H&R Block currently carries a Zacks Rank #3 (Hold).
Some better-ranked service stocks are The Interpublic Group of Companies, Inc. IPG , Gartner, Inc. IT and TeleTech Holdings TTEC. The Interpublic Group of Companies and Gartner carry a Zacks Rank #2 (Buy), while TeleTech sports a Zacks #1 Rank (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term expected earnings per share (three to five years) growth rate for The Interpublic Group of Companies, Gartner and TeleTech is pegged at 2.4%, 13.5% and 14.7%, respectively.
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