Hb Case Study Solution
HRB has two distinct sections of their business that drives the majority of their revenues. These business drivers include their retail division and the digital tax business that allows customers to self-file taxes electronically online. In fiscal year 2015, HRB reported revenue totaling $3.02 billion, and net earnings totaled $485.9 million. In 2014 revenues were estimated to total $2.91 billion and $2.89 billion to conclude their 2013 fiscal year. The data indicates a steady increase in revenue (Appendix B).
In …show more content…
Although they are down by $1 million same quarter 2014. HRB has managed to make an improvement with the long-term-debt. In 2013 HRB long-term-debt topped off at $905.4 million dollars and they’ve diligently decreased their long-term-debt by 0.1% from 2014 to 2015. Using the debt/equity ratio we rationalize that as of the close of fiscal 2015 HRB carries a 0.28% debt-to equity percentage signifying they have the ability to balance debt and pay notes without stressing the balance sheet. The debt-to-equity ratio of 1.44 exhibits their ability to thwart short-term cash flow issues.
The tax giant has consecutively produced positive earning per share (EPS) year over year. HRB garnered a 24.2% increase from 2012-2013. EPS from $1.28 to $1.59, an increase up to $1.67. The 2015 Yearly Report stated an adjusted EPS of 1.75 for the fiscal year. HRB is a steady stock with the potential for growth based on the Earnings per share and E/P ratio. We can also rationalize the before statement by evaluating the Weighted Average Cost Capital (WACC).
H&R Block has a WACC is 14.18%. The WACC proves that HRB is generating higher returns on investment than it costs the company to raise the amount of capital needed for that investment. It is earning excess …show more content…
Understanding the significance of the beta rating we know HRB is teetering on being listed as a stock with the potential to become more volatile than the market if their beta continuously increases. HRB stock prices over the past fiscal year have not fluctuated dramatically (Appendix D). H&R Block is currently trading lower than its peers. With a P/E ratio of 18.59 the stock is selling less than competitors at -1.18%. Because, the stock is selling less than it’s competitors does not negate the consistency of the stock. Many factors could influence the future price of stock, and the analyst ratings to buy, hold or sell. The major driver causing analyst to waiver in their credit rating is partly due to the inability to divest its BofI Federal Bank. Once the bank has been sold HRB could release over $200 million in capital that is mandated by regulators to be placed in reserve. With the release of the estimated $200 million HRB could potentially pay down a greater portion of their long-term-debt or invest in strategies and products to increase revenue (Appendix E). Labourious economic conditions that affect employment could potentially strain their pricing model and ultimately affect their pricing and profitability. HRB operates in several countries and tax legislation, the change in tax rates will pose as a significant risk. Increased competition pose as a risk as competitors offer free tax preparation services. HRB