December 20, 2010 H&R BLOCK, INC.

(NYSE: HRB)

PRICE: $12.99
Ave. Vol: 4.5 Mil.
EPS Est: $1.56
EPS Yield: 12.00%
Book Value: $3.32

Industry: Services
Employees: 7,700

Guru Inv: 5.72%

Short Pos: 12.00%

Intrinsic Value: $23.70

Target Price: $23.00

Investment Briefing: H&R Block, Inc. Company Financials

H&R Block, Inc. (H&R Block) has subsidiaries that provide tax, banking, and Sales 3.9 BB Book Growth 39%
business and consulting services. The Company’s Tax Services segment Net Income 510 MM Sales Growth 40%
Net Profit Margin 13.22% Earnings Growth 77%
provides income tax return preparation, electronic filing and other services and
products related to income tax return preparation to the general public Current Assets 1.74 BB ROE (Average) 29.30%
primarily in the United States, and also in Canada and Australia. Total Assets 4.31 BB ROE (Current) 44.40%
Total Liabilities 3.43 BB ROA (Average) 6.43%
The Tax Services division served about 23.2 million clients in FY 2010, down Shareholder Eq. 879.8 MM ROA (Current) 8.29%
3%, but the company still operated 11,506 company-owned and franchised
52 Week Low 10.13 P/E (Average) 16.30
U.S. This division makes up 77% of their revenue and 110% of their profits, 52 Week High 23.23 P/E (Forward) 7.38
which means they are losing money on some of their other services.
Inst. Ownership 90.00% Total Cash 1.10 BB
If I had $4 billion I might think seriously about buying HRB outright because Insider Ownership 4.34% Long Term Debt 1.12 BB
since 2001 the company has earned over $4.3 billion. So, in essence, I would
Market Value 3.96 BB Dividend 0.60
have recouped my original investment and be making net gains going forward. Shares (Total) 305.1 MM Dividend Yield 4.62%
But, where are they going from here?
Financial Data in US Dollars BB - Billions MM - Millions K - Thousands
Analysts put their net earnings at $3.32 per share over the next two years,
which would mean they take in over $1 billion by the end of 2012. That's 1/4 of
the current market share. Seems to be a pretty good deal if they can Investment Highlights:
accomplish it and the market (traders, funds, etc) continues to value it at the
 H&R Block is still the leader in tax preparation in the
current multiple.
United States and they seem to be getting stronger from
Of course, I think they will eventually put the multiple closer to 12 - 15 the looks of their rises in net earnings.
sometime during the year, which would give HRB a $23 price tag. Tax season
 Insiders have been buying the stock, yet 12% of HRB’s
is coming and Jackson Hewitt and Intuit, H&R Block's biggest competition are
stock is being sold short. Shorts start covering and the
both way too pricey, investors will come to their senses eventually and be
stock moves higher, and they will have to start covering if
buying this stock.
HRB continues to produce solid earnings numbers.
From a financial standpoint, it's hard to find a better bargain in this industry.
 HRB earns 110% of its profit on the Tax Services, which
And, while the company might not have grown at the same rate it did in the
are pretty stable year after year.
90’s, yet the value they provide to the market is still second to none. And, if
the other parts of the business become profitable or are sold off, the
company’s earnings will rise and increase the intrinsic value.

NOTE: Some pretty big name investment gurus own H&R Block including
George Soros, Bill Nygren, Mario Gabelli, and Don Yacktman. The good news
is that they own HRB at much higher prices and many are adding to their
positions.

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