Photo by Kelly Sikkema on Unsplash
 

As part of our ongoing series at The Acquirer’s Multiple, each week we spotlight a stock from our Stock Screeners that may be a deeply undervalued opportunity hiding in plain sight. This week’s spotlight is H&R Block, Inc. (NYSE: HRB).

H&R Block is a leading provider of tax preparation services across the U.S. and Canada, serving millions of individuals and small businesses each year. The company combines a sticky, recurring customer base with a highly seasonal but extremely cash-generative operating model. Over the last decade, management has complemented steady cash flows with aggressive buybacks, margin expansion, and a disciplined focus on returning capital to shareholders.

What Is IV/P (Intrinsic Value to Price)?

IV/P compares a company’s estimated intrinsic value to its current market price. It blends earnings power, capital efficiency, and reinvestment policy to estimate what the business is truly worth.

• IV/P above 1 → stock may be undervalued
• IV/P below 1 → stock may be overvalued
• The further above 1, the greater the margin of safety.

HRB’s IV/P is 1.50, implying the market is pricing the company at only two-thirds of its estimated intrinsic value. For a stable, cash-rich business with decades of brand equity and a proven capital-return model, this signals potentially meaningful upside.

Supporting Metrics

• Market Cap: ~$6.1B
• Free Cash Flow (TTM): ~$576M
• Free Cash Flow Yield: ~9.4%
• Acquirer’s Multiple: 8.10×

While not as low as deep-cyclical names, an AM of 8.10× remains attractive for a mature service business with resilient recurring revenues and strong free cash flow conversion. HRB’s valuation continues to imply low growth or structural decline—yet the company continues to post stable revenue, strong margins, and consistent cash generation.

Revenue & Profitability

(TTM)

• Revenue: ~$3.77B
• Gross Profit: ~$1.68B
• Operating Income: ~$849M
• Operating Margin: ~22%
• Net Income: ~$610M
• Diluted EPS: ~$4.37

Despite being a seasonal business, HRB generates reliable annual revenue and strong profitability. Operating margins above 20% reflect the efficiency of its hybrid online/in-office model and the scalability of its digital tax platform. HRB converts a significant portion of operating income into free cash flow due to minimal capital expenditure requirements.

Balance Sheet Strength

(Most recent quarter)

• Total Assets: ~$2.62B
• Cash & Equivalents: ~$376M
• Receivables: ~$51M
• Total Debt: ~$2.25B
• Net Debt: ~$1.36B
• Working Capital: –$175M (normal for a seasonal tax business)

H&R Block’s balance sheet reflects its seasonal model—large temporary liabilities build during tax season, then unwind as revenue comes in. Importantly, HRB maintains manageable net debt, strong cash generation, and a long track record of reducing share count through disciplined buybacks.

Capital Returns

• Free Cash Flow (TTM): ~$576M
• Dividends: Consistently paid and raised over time
• CapEx: ~$76M TTM
• Share Repurchases: Ongoing and aggressive

Few companies return capital as consistently as HRB. Management targets excess FCF almost entirely toward buybacks and dividends, resulting in one of the most shareholder-friendly capital return programs in the S&P MidCap universe.

Why Might HRB Be Undervalued?

Despite strong cash flows, a resilient customer base, and decades of brand dominance, the market continues to view H&R Block as a declining, low-growth tax service business threatened by digital disruption. Yet:

• Revenue and EPS remain stable.
• Free cash flow remains robust.
• The company’s digital offerings continue to grow.
• Buybacks meaningfully reduce share count each year.
• Operating margins remain strong and steady.

With an IV/P of 1.50 and an Acquirer’s Multiple of 8.10, HRB appears undervalued relative to its steady earnings power, recurring seasonal cash flows, and long-term capital allocation track record.

Conclusion

H&R Block, Inc. (HRB) represents a compelling blend of quality, stability, and deep value. Its durable business model, strong free cash flow, and shareholder-friendly capital allocation stand in contrast to a valuation that suggests stagnation or decline. For value investors seeking predictable cash flows, prudent management, and a margin of safety, HRB may be a quietly attractive opportunity hiding in plain sight.

More By This Author:

Our Calculation Of Intrinsic Value: Walmart Inc.
Why Top Investors Are Buying Visa Inc.
CF Industries: Deep Value In A Cyclical Fertilizer Leader