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Here's Why Investors Should Retain H&R Block (HRB) Stock Now

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A prudent investment decision involves buying stocks that have solid prospects and selling those that carry risks. At times, it is rational to hold certain stocks that have enough potential but are weighed down by tough market conditions.

We believe H&R Block, Inc. (HRB - Free Report) with long-term expected EPS growth rate of 10% and a market cap of $4.9 billion is one such stock and investors should retain it in their portfolios.

Factors That Bode Well

The U.S. government’s tax reform that led to lower tax rates and simpler codes reduced the demand for H&R Block’s assisted tax preparation services. The business suffered post tax reform, leaving an adverse impact on the stock price, which has declined 5.9% in a year.

Currently, management expects betterment in the tax business, which along with contribution from the acquisition of Wave Financial, is expected to help the company grow its top line by 1.5% to 3.5% in the current fiscal year. The Wave Acquisition has expanded H&R Block's product and client portfolio and strengthened its position in the large and expanding small business market.

Additionally, cost reductions are expected to offset operating losses from Wave acquisition, thus positively impacting margin. Expansion of digital offerings in new areas is helping the company to attract and retain new clients, positively impacting earnings growth.

Zacks Rank and Stocks to Consider

H&R Block currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Business Services sector include Fiserv (FISV - Free Report) , Booz Allen Hamilton (BAH - Free Report) and Charles River Associates (CRAI - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term expected EPS (three to five years) growth rate for Fiserv, Booz Allen and Charles River is 12%, 13% and 13%, respectively.

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