For those who appreciate value investing, NYSE:HRB is a compelling option with its solid fundamentals.

Last update: Nov 8, 2023

Discover H&R BLOCK INC (NYSE:HRB)—an undervalued stock our stock screener has picked out. NYSE:HRB demonstrates solid fundamentals, including health and profitability, all while staying attractively priced. Let's explore the details.

Valuation Assessment of NYSE:HRB

To assess a stock's valuation, ChartMill utilizes a Valuation Rating on a scale of 0 to 10. This comprehensive assessment considers various valuation aspects, comparing price to earnings and cash flows, while factoring in profitability and growth. NYSE:HRB has achieved a 8 out of 10:

With a Price/Earnings ratio of 10.66, the valuation of HRB can be described as very reasonable.
85.07% of the companies in the same industry are more expensive than HRB, based on the Price/Earnings ratio.
The average S&P500 Price/Earnings ratio is at 23.44. HRB is valued rather cheaply when compared to this.
A Price/Forward Earnings ratio of 9.83 indicates a reasonable valuation of HRB.
Compared to the rest of the industry, the Price/Forward Earnings ratio of HRB indicates a rather cheap valuation: HRB is cheaper than 88.06% of the companies listed in the same industry.
When comparing the Price/Forward Earnings ratio of HRB to the average of the S&P500 Index (18.82), we can say HRB is valued slightly cheaper.
Based on the Enterprise Value to EBITDA ratio, HRB is valued a bit cheaper than 70.15% of the companies in the same industry.
HRB's Price/Free Cash Flow ratio is rather cheap when compared to the industry. HRB is cheaper than 89.55% of the companies in the same industry.
The decent profitability rating of HRB may justify a higher PE ratio.
A more expensive valuation may be justified as HRB's earnings are expected to grow with 12.54% in the coming years.

Exploring NYSE:HRB's Profitability

ChartMill assigns a Profitability Rating to every stock. This score ranges from 0 to 10 and evaluates the different profitability ratios and margins, both absolutely, but also relative to the industry peers. NYSE:HRB scores a 7 out of 10:

HRB has a Return On Assets of 12.46%. This is amongst the best in the industry. HRB outperforms 91.04% of its industry peers.
HRB's Return On Equity of 1193.95% is amongst the best of the industry. HRB outperforms 100.00% of its industry peers.
The Return On Invested Capital of HRB (20.75%) is better than 95.52% of its industry peers.
Measured over the past 3 years, the Average Return On Invested Capital for HRB is significantly above the industry average of 9.44%.
The last Return On Invested Capital (20.75%) for HRB is well below the 3 year average (27.02%), which needs to be investigated, but indicates that HRB had better years and this may not be a problem.
HRB has a Profit Margin of 10.48%. This is amongst the best in the industry. HRB outperforms 89.55% of its industry peers.
With an excellent Operating Margin value of 14.77%, HRB belongs to the best of the industry, outperforming 80.60% of the companies in the same industry.

Evaluating Health: NYSE:HRB

ChartMill employs its own Health Rating for stock assessment. This rating, ranging from 0 to 10, is calculated by examining various liquidity and solvency ratios. In the case of NYSE:HRB, the assigned 7 reflects its health status:

An Altman-Z score of 3.05 indicates that HRB is not in any danger for bankruptcy at the moment.
With a decent Altman-Z score value of 3.05, HRB is doing good in the industry, outperforming 74.63% of the companies in the same industry.
The Debt to FCF ratio of HRB is 1.98, which is an excellent value as it means it would take HRB, only 1.98 years of fcf income to pay off all of its debts.
Looking at the Debt to FCF ratio, with a value of 1.98, HRB belongs to the top of the industry, outperforming 82.09% of the companies in the same industry.
Although HRB does not score too well on debt/equity it has very limited outstanding debt, which is well covered by the FCF. We will not put too much weight on the debt/equity number as it may be because of low equity, which could be a consequence of a share buyback program for instance. This needs to be investigated.

ChartMill's Evaluation of Growth

To evaluate a stock's growth potential, ChartMill utilizes a Growth Rating on a scale of 0 to 10. This comprehensive assessment considers various growth aspects, including historical and estimated EPS and revenue growth. NYSE:HRB has achieved a 4 out of 10:

Based on estimates for the next years, HRB will show a quite strong growth in Earnings Per Share. The EPS will grow by 12.54% on average per year.
When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is accelerating.

More Decent Value stocks can be found in our Decent Value screener.

For an up to date full fundamental analysis you can check the fundamental report of HRB

Keep in mind

This is not investing advice! The article highlights some of the observations at the time of writing, but you should always make your own analysis and invest based on your own insights.