H&R Block, Inc. (HRB) Soars to 52-Week High, Time to Cash Out?

Have you been paying attention to shares of H&R Block (HRB)? Shares have been on the move with the stock up 21.8% over the past month. The stock hit a new 52-week high of $45.87 in the previous session. H&R Block has gained 90.1% since the start of the year compared to the -27.9% move for the Zacks Consumer Discretionary sector and the -6.7% return for the Zacks Consumer Services - Miscellaneous industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on August 9, 2022, H&R Block reported EPS of $1.43 versus consensus estimate of $1.26 while it beat the consensus revenue estimate by 6.2%.

For the current fiscal year, H&R Block is expected to post earnings of $3.75 per share on $3.56 billion in revenues. This represents a 6.84% change in EPS on a 2.65% change in revenues. For the next fiscal year, the company is expected to earn $3.74 per share on $3.59 billion in revenues. This represents a year-over-year change of -0.05% and 1.04%, respectively.

Valuation Metrics

H&R Block may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

H&R Block has a Value Score of A. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 12X current fiscal year EPS estimates, which is not in-line with the peer industry average of 12X. On a trailing cash flow basis, the stock currently trades at 9.6X versus its peer group's average of 9.3X. Additionally, the stock has a PEG ratio of 0.96. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, H&R Block currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if H&R Block fits the bill. Thus, it seems as though H&R Block shares could have a bit more room to run in the near term.

How Does HRB Stack Up to the Competition?

Shares of HRB have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is SP Plus Corporation (SP). SP has a Zacks Rank of # 1 (Strong Buy) and a Value Score of B, a Growth Score of B, and a Momentum Score of B.

Earnings were strong last quarter. SP Plus Corporation beat our consensus estimate by 15.71%, and for the current fiscal year, SP is expected to post earnings of $2.83 per share on revenue of $762.85 million.

Shares of SP Plus Corporation have gained 16.8% over the past month, and currently trade at a forward P/E of 12.59X and a P/CF of 12.46X.

The Consumer Services - Miscellaneous industry is in the top 37% of all the industries we have in our universe, so it looks like there are some nice tailwinds for HRB and SP, even beyond their own solid fundamental situation.

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