H & R Block Inc.HRB

Morningstar Rating

Stock Research and Analysis

by Vishnu Lekraj

Taxes are inevitable, and the complexity of the U.S. tax code is likely to persist. Many U.S. taxpayers look to experts to help with filing their tax returns, and the fragmented nature of the market means there are a plethora of options. Despite the commoditylike nature of this service, H&R Block has positioned itself well and has built a wide economic moat, in our opinion. Read more

Bulls Say

H&R Block recently exited the mortgage and brokerage businesses and has renewed its focus on its core tax preparation unit.

Dedication to a leaner structure has paid off thus far, as the firm was able to cut costs and increase profits significantly during 2009.

H&R Block is the clear leader in the tax preparation market, with about 16% share. Read more

Bears Say

H&R Block entered the subprime mortgage business during the height of the housing boom and has been hurt by significant losses.

The firm's highly profitable refund-anticipation loans have come under scrutiny as being predatory.

The firm has lost a material portion of its market share over the past few years.

Increased competition from traditional office-based tax preparers and online and software developers will pressure the overall operating environment for the firm. Read more

Strategy

Management has refocused on improving the core tax preparation business. The firm recently exited its mortgage and brokerage business lines as a part of this new strategic shift. The firm is also looking toward its online and software self-service products to preserve and recapture market share. Read more

Management

Primarily because of the subprime mortgage debacle, hedge fund manager and former Securities and Exchange Commission chairman Richard Breeden was elected as H&R Block's chairman in 2007. He replaced Mark Ernst, who also lost his position as CEO. Read more

Profile

H&R Block is the leader in tax preparation with about 16% market share, offering store-based and digital tax solutions The firm also offers several financing services to its customers, including refund-anticipation loans and lines of credit. Read more

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