H&R Block

Not Rated

I started buying this one around $15 per share in August 2020

At the time I bought, $HRB had 192m shares outstanding and a ~$2.9bn market cap. After shares have rallied back to $26 and the company repurchased some stock, it's now a $4.75bn market cap (June 2021).HRB prepares tax returns in retail locations. This hasn't been a huge growth business as more consumers are preparing their returns themselves using DIY online software. HRB is also a player in the DIY online software but it's a much smaller piece of the business. They also recently acquired Wave (as a competing product to QuickBooks Online) to break into the small business market.Free cash flow from 2016-2019 was a very steady $500m+ per year ($2.60 per share). Meaning this was trading at 5.8x FCF at the depths of the COVID scare. Oh and it was also trading at a 7% dividend yield (vs. 4% yield in June 2021).The stock wasn't really down because of COVID per se. Although unemployment can impact the number of returns filed, 2020 was going to be messy with unemployment income, CARES Act, and all sorts of temporary relief measures that would need to be accounted for. So the real reason (in my opinion) that HRB was off so much was due to the IRS pushing the tax deadline from April 15 to July 15 -- this caused increased costs for all tax preparers... more marketing, heavier customer service, more staff, all for the same level of returns filed. At a minimum, shares should trade in the mid-20s which is in-line with historical cash generation (~10x FCF). Upside looks to be approximately $27 per share.Copy of December 2020 investor day presentation:Revenue mix from FY21 results (June 2021)Here's my latest twitter thread on the business


Financials & Valuation