H&R Block, Inc. (HRB)

Downthumb. Good cash flow. Very low sales growth. Nominal to high debt ratio. Low margins. New advertising strategy poses high risks and increased expenses.

fool

Read the news.

Slow growth somewhat unprofitable market share leader at reasonable price.

bullish.

good stock

near bottom price wise, balance sheet doesn't stink, recognizable name. Tax season revenue pending

growing shift "from assisted to do-it-yourself tax preparation methods."

I belive the business of this company and all other Tax services companies has been assured by the congress, when it prevented IRS come up with any software solution to file taxes. Tracking the prices of Tax software over last 10 years one can easily see that till 2006 the prices remained fairly constant, since 2007, these companies have suddenly found that they can raise prices. The main reason for this is the fact that IRS cannot come up with any competing solution. Hence Intuit and H&R block have monopoly on the tax software and hence the ability to raise prices.

I expect these companies to beat the market handily due to this monopoly.

THE TAXES COMPANY

Hyper-Contrarian it looks like. With all these new rules and regulations coming out from the government due to the credit crunch, financial advisory consultants will get more business as businesses and firms evaluate what they can and can not do now.

Getting back to core business. New management. Congress tends to complicate rather than simplify taxes.

Currently in my portfolio

H&R is down compared to prior years and stands to move lower. Take that with the fact that this is a VERY cyclical stock (peaking right after tax season in April and falling over the next six months), this is a great time to short.

Couple the declining financial, the reimbursements about to go out, tax season ending, and the lawsuits over discrimination, then this one is a great to short from now till December.

Profitability should stabilize now that H&R has closed the sale of its Option One Mortgage Corp. Looking long term as new CEO has not yet announced earnings guidance beyond fiscal 2009.

multiple technical signals (score .25)

First quarter 09

Declining sales: check.
Liabilities > assets: check.
Holds bad debt: check.
PEG of ~4: check.
Stock price inexplicably jumping after they record only 4% customer growth: check.

Looks like a good real-money short candidate.

The odd thing is, I've used hrblock.com to prepare my taxes for the last 3 years and like it a lot (cheap, easy interface, etc.)

This stock doesnt have any short term attraction what so ever. Financial services are down, turbo tax will kill the tax service, mortgages are a mess. I cant believe the P/E is 20! Come on people, all together now O-V-E-R-V-A-L-U-E-D