Could Cash Machine H&R Block Stock Be Your Next Buy?

H&R Block (HRB) could be a good pick for your portfolio, with its high cash yield, good fundamentals, and discounted valuation. Companies like this can use cash to fuel additional revenue growth, or simply pay their shareholders through dividends or buybacks. Either move makes them attractive to the market

What Is Happening With HRB

HRB may be down -18% so far this year but is now trading at P/S (Price-to-Sales) ratio that is at a meaningful discount to its 3-month and 2-year highs, and also belowits 3-year average.

The stock may not reflect it yet, but here is what’s going well for the company. H&R Block saw increased company-owned return volumes in the U.S., particularly in its small business segment, driving 4.2% revenue growth in fiscal 2025. Q1 fiscal 2026 revenue rose 5% due to higher net average charges and Wave subscription growth. The company is leveraging AI in its 2025 tax software, offering tools like AI Tax Assist and a free “Second Look” review for prior returns, enhancing client experience. Management reaffirmed its fiscal 2026 outlook, anticipating continued stability.

HRB Has Good Fundamentals

• Good Cash Yield: Not many stocks offer free cash flow yield of 8.7%, but H&R Block stock does
• Strong Margin: Last 12 month operating margin of 22.5%
• Growth: Last 12 revenue growth of 4.2% – low growth, but this selection is all about high yield and margin
• Valuation: HRB stock currently trading at 34% below 2Y high, 18% below 1M high, and at a PS lower than 3Y average.

Below is a quick comparison of HRB fundamentals with S&P medians.

*LTM: Last Twelve Months

But What Is The Risk Involved?

While HRB stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. HRB took some serious hits in past crises. It dipped 51% in the Dot-Com bubble and dropped 46% during the Global Financial Crisis. The stock fell over 51% again in the Covid pandemic and about 39% in the Inflation Shock. Even the smaller 2018 correction wiped out around 26%. So, even with solid fundamentals, HRB isn’t immune when markets turn south. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read HRB Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

For more details and our view, see Buy or Sell HRB Stock.

Stocks Like HRB

Not ready to act on HRB? Consider these alternatives:

1. Salesforce (CRM)
2. PayPal (PYPL)
3. Etsy (ETSY)

We chose these stocks using the following criteria:

1. Greater than $2 Bil in market cap
2. Dipped last month & meaningfully below 2Y high
3. Current P/S < last few year average
4. Strong operating margin with no instances of large margin collapse
5. High free cash flow yield

A portfolio of stocks with the criteria above would have performed has follows since 12/31/2016:

• Average 6-month and 12-month forward returns of 10.4% and 20.4% respectively
• Win rate (percentage of picks returning positive) of about 74% for 12-month period
• Strategy consistent across market cycles

The Best Investors Think In Portfolios

Individual picks can be volatile but staying invested is what matters. A diversified portfolio helps you stay the course, capture upside and reduce downside

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.