H&R Block Stock: Strong Cash Flow Poised for a Re-Rating?
We think H&R Block (HRB) stock is worth a look: It is growing, producing cash, and available at a significant valuation discount. 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
H&R Block is currently trading at a significant discount to its historical highs and broader sector peers like Intuit. While revenue grew 11.1% in Q2 FY26, the stock has faced pressure due to a widening adjusted loss per share ($1.84 vs. $1.73 YoY). While investors expect seasonal losses in the December quarter, the deeper-than-expected loss highlights rising operational costs – specifically higher field wages and consulting fees – offsetting top-line gains. Market sentiment is also weighed down by the “One Big Beautiful Bill Act” (OBBBA). While the act creates complexity that traditionally drives users toward H&R Block’s assisted services, it also fuels long-term concerns regarding the expansion of government-provided “Direct File” services.
The stock may not reflect it yet, but here is what’s going well for the company: H&R Block’s revenue grew 11.1% in Q2 FY26, driven by higher assisted tax preparation volume and strong Wave small business platform expansion. The company launched AI Tax Assist and enhanced AI tools for professionals, improving client experience and operational efficiency. Debt-to-equity is low, and $507.7 million was returned to shareholders year-to-date through repurchases and increased dividends. Fiscal 2026 revenue guidance of $3.875-$3.895 billion was reaffirmed, underpinned by efforts to attract complex clients and strategic franchise acquisitions.
HRB Has Strong Fundamentals
- Cash Yield: H&R Block offers an impressive cash flow yield of 13.8%.
- Growing: Revenue growth of 4.7% over the last twelve months is not that great, but your cash pile is likely to grow.
- Valuation Discount: HRB stock is currently trading at 32% below its 3-month high, 50% below its 1-year high, and 52% below its 2-year high.
Below is a quick comparison of HRB fundamentals with S&P medians.
| HRB | S&P Median | |
|---|---|---|
| Sector | Consumer Discretionary | – |
| Industry | Specialized Consumer Services | – |
| Free Cash Flow Yield | 13.8% | 4.2% |
| Revenue Growth LTM | 4.7% | 6.6% |
| Operating Margin LTM | 22.3% | 18.7% |
| PS Ratio | 1.0 | 3.2 |
| PE Ratio | 6.2 | 24.3 |
| Discount vs 3-Month High | -32.4% | -9.9% |
| Discount vs 1-Year High | -50.5% | -13.1% |
| Discount vs 2-Year High | -52.2% | -14.9% |
*LTM: Last Twelve Months
But What About 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, and outlook changes. Read HRB Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
If you want to see more details, read Buy or Sell HRB Stock.
Other Stocks Like HRB
Not ready to act on HRB? You could consider these alternatives:
We chose these stocks using the following criteria:
- Greater than $2 Bil in market cap
- Positive revenue growth
- High free cash flow yield
- Meaningful discount to 3M, 1Y, and 2Y highs
A portfolio that was built starting 12/31/2016 with stocks that fulfill the criteria above would have performed as follows:
- Average 6-month and 12-month forward returns of 25.7% and 57.9% respectively
- Win rate (percentage of picks returning positive) of >70% for both 6-month and 12-month periods
Portfolios Beat Stock Picking
Individual stocks can soar or tank but one thing matters: staying invested. The right portfolio can help you stay invested, capture upside and mitigate the downside associated with any individual stock.
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? HQ Portfolio has posted more than 105% in cumulative return since inception, with less risk versus the benchmark index, as evident in HQ Portfolio performance metrics.