REUTERS: H&R Block Inc gained slightly on Friday after rallying in 13 out of the last 14 sessions as bargain-hunting investors had bet a Joe Biden presidency will help the virus-battered tax preparer along with a coronavirus vaccine.
The stock, while dramatically underperforming the market year-to-date, has recently outperformed noticeably.
On Friday it was up 0.1per cent at US$17.76 after rising 27.6per cent from Sept 18 to Thursday's close. The S&P 400 was up 0.5per cent on Friday after gaining 6.8per cent between Sept. 18 and Thursday.
H&R Block has fallen about 24per cent year-to-date versus a roughly 3per cent drop in the index.
BTIG analyst Mark Palmer said the rally has hinged on investor expectations going forward "politically and in terms of the pandemic."
While Trump in 2016 promised a tax code so simple it would put H&R Block out of business, investors see Biden tax changes leading consumers back to H&R Block. On Thursday, its shares closed 20per cent lower than the day Trump won the 2016 election.
"Obviously it didn't have the kind of impact (Trump) was ascribing," said Palmer. "The flip side is the view that if we see significant tax changes under a democratic administration there could be an increased need for consumers to seek help."
Investors are also betting a coronavirus vaccine will allow more in-person tax appointments.
"HRB's ability to operate was severely impaired by the pandemic ... particularly for their in-store assisted tax preparation," said Palmer who rates the stock neutral.
Barrington Research analyst Alexander Paris sees a low price to earnings ratio as a key to the recent rally with the stock trading around 5 times his 2020 earnings per share estimate and 4 times his 2021 estimate versus a five-year average of 13.5.
Also Paris expects a much better 2021 than 2020 when tax day moved from April to July because of the coronavirus lockdown.
(Reporting By Sinéad Carew; Editing by David Gregorio)