H&R Block, Inc. (HRB): A Bull Case Theory

We came across a bullish thesis on H&R Block, Inc. on Compounding Dividends’s Substack by TJ Terwilliger. In this article, we will summarize the bulls’ thesis on HRB. H&R Block, Inc.'s share was trading at $38.87 as of January 29th. HRB’s trailing and forward P/E were 8.85 and 7.28 respectively according to Yahoo Finance.

H&R Block is a leading provider of tax preparation services, operating through an extensive network of physical offices alongside a growing digital software platform that caters to both assisted and do-it-yourself filers. In addition to its core tax business, the company has expanded into adjacent financial services through offerings such as the Spruce mobile banking app, which is designed to deepen customer relationships beyond tax season and improve year-round engagement. This hybrid model allows H&R Block to serve a broad spectrum of customers while maintaining scale advantages and brand trust built over decades.

What makes the company particularly compelling is its strong and consistent free cash flow generation. In FY25, H&R Block generated approximately $600 million in free cash flow and returned roughly the same amount to shareholders, demonstrating both the durability of the business and management’s confidence in its cash-generating ability. Despite the seasonal nature of tax preparation, the company has structured its balance sheet and liquidity profile to ensure adequate year-round liquidity, reducing operational risk and supporting ongoing shareholder returns.

Structural tailwinds also support the long-term investment case. Tax codes continue to grow more complex as governments introduce new deductions, credits, and compliance requirements, which increases demand for expert-assisted tax preparation, particularly among households and small businesses.

Management has complemented this stable demand profile with highly aggressive capital allocation, having repurchased nearly 47% of shares outstanding since 2016, materially enhancing per-share value. Additionally, the acquisition of Wave introduces a higher-growth SaaS accounting platform focused on small businesses, diversifying revenue streams and reducing reliance on the traditional, seasonal tax cycle. Taken together, H&R Block combines a resilient core business, disciplined capital returns, and incremental growth optionality, making it an attractive cash-flow-driven investment.

Previously, we covered a bullish thesis on Intuit Inc. (INTU) by Quality Equities in May 2025, which highlighted the company’s durable competitive advantages, recurring SaaS revenue, and ecosystem strength across TurboTax and QuickBooks. The company’s stock price has depreciated by approximately 24.05% since our coverage. The thesis still stands as Intuit remains a long-term compounder. TJ Terwilliger shares a similar but emphasizes on dividend safety, free cash flow, and capital returns at H&R Block.

H&R Block, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 31 hedge fund portfolios held HRB at the end of the third quarter which was 36 in the previous quarter. While we acknowledge the potential of HRB as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.