2-Star Stocks Poised to Plunge: H&R Block?
Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, tax prep specialist H&R Block (NYS: HRB) has received a distressing two-star ranking.
With that in mind, let's take a closer look at H&R Block's business and see what CAPS investors are saying about the stock right now.
H&R Blockfacts
Headquarters (Founded) | Kansas City, Mo. (1946) |
Market Cap | $4.12 billion |
Industry | Specialized consumer services |
Trailing-12-Month Revenue | $3.63 billion |
Management | CEO William Cobb (since May 2011) CFO Jeff Brown (since September 2010) |
Return on Equity (Average, Past 3 Years) | 42.6% |
Cash/Debt | $1.01 billion / $1.08 billion |
Dividend Yield | 4.4% |
Competitors | Intuit (NAS: INTU) |
Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.
On CAPS, 31% of the 565 members who have rated H&R Block believe the stock will underperform the S&P 500 going forward. These bears include hymettus and All-Star TSIF, who is ranked in the top 1% of our community.
Earlier this summer, hymettus touched on the do-it-yourself tax prep trend working against H&R Block:
This company cannot compete with the cheap online alternatives. Jackson Hewitt went down first. Next victim ... [Liberty Tax Service] ... but then HRB! I recommend shorting HRB and buying lots and lots of T-bills.
Over the past three years, in fact, H&R Block's top line has declined at a rate of 3% annually. Meanwhile, industry peers like Intuit, Paychex (NAS: PAYX) , and Iron Mountain (NYS: IRM) have grown their revenues at a rate of 8.8%, 0.3%, and 2.7%, respectively.
CAPS All-Star TSIF elaborates on the H&R Block bear case:
I thought rival Jackson Hewitt going bankrupt might help them, but the fact remains that customers of walk-in services for taxes continue and will continue to decline as online, free, and computer software programs continue to grow. Should the government (not likely in the short run) ever simplify the tax system then business will bottom hard for H&R Block. Possible changes to deductions may change the long form/short form mix as well. ...
H&R Block, from a "short perspective" may have some divisional sells or small acquisitions to shake the stock and rattle the shorts from time to time, but I can't see much upward momentum as far as the eye can see.
What do you think about H&R Block, or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!
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At the time thisarticle was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Paychex. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.
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