It’s That Time of Year Again: Quant Ratings on 3 Tax Stocks 

By Jason Bodner

If you’re like me, you’ve been up to your neck in taxes.

And if you’re like me, you hate this annual rigamarole.

I got serious about collecting all the necessary paperwork just this week. And I’m not alone.

We put it off as long as possible because it’s so painfully tedious. According to IRS estimates, it takes individuals 13 hours to complete their tax returns each year.

Nearly one-third of taxpayers file in the final three weeks leading up to the dreaded Tax Day – that’s about 43 million returns.

No wonder there were seemingly unending lines of people at the Post Office on April 15 to postmark their returns by midnight. Some people would get in line and finish their taxes while they waited.

While still a royal pain, tax preparation and filing have come a long way. Gone are the days of dashing to your local post office, as approximately 90% of returns are now filed online.

There are also plenty of local and national tax preparation companies who can do it for you. And if you prefer to do it yourself, programs like TurboTax let you file online for free (or for a small fee) in a matter of minutes.

So consider this a friendly push to get your taxes done if you haven’t already. It does feel awfully good when you finish.

And instead of just using programs and companies to alleviate some of the tax preparation pain, let’s look at a few stocks using my Quantum Edge system to see if any are also good investments… maybe with your refund (if you’re one of the lucky ones).

The first two companies are well-known when it comes to taxes. The third might surprise you.

H&R Block (HRB)

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You’ve probably seen the commercial of the H&R Block “mascot” dancing through the grocery store celebrating a woman’s max refund the company got for her. That’s the pitch H&R Block (HRB) makes: Max refund and 100% accuracy or your money back.

I have to admit, it’s memorable… even if a bit dorky.

H&R Block is probably the best-known tax preparation company in the U.S., and it also operates in Canada and Australia. We obviously don’t have this season’s revenue figures yet, but the January to March quarter is far and away the company’s biggest. Makes sense.

Last year, HRB brought in $2.1 billion, making up 60% of the $3.5 billion in sales for the full year. Quarterly earnings of $4.20 per share exceeded full-year earnings of $3.89. How is that possible? HRB lost money in the two prior quarters.

While tax season revenue is impressive, it’s not enough to make this stock a buy. Stocks with a Quantum Score of 70 to 85 are in the optimal buy zone, and HRB has a mediocre score of 58.6.

Its fundamentals also score on the low side at 54.2. As we’ve seen, sales are uneven throughout the year, and in total the company has low one- and three-year sales growth of just 0.3%. It also carries a ton of debt at more than 7X equity – a major red flag for me.

HRB has done pretty well. The stock has jumped 36% and 76% over the last one and two years. The data just doesn’t give me enough confidence to expect those same returns going forward.

Intuit (INTU)

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Intuit (INTU) is the parent company behind financial software like QuickBooks, Credit Karma, and TurboTax. Like H&R Block, TurboTax promises 100% accuracy and your max refund guaranteed, and all done online. They offer three different ways to file: do it yourself, receive help from a tax expert, or have an expert take care of it all from start to finish.

Intuit is expecting revenue growth above Wall Street estimates due to a surge in demand for its financial management tools boosted by A.I. – and, of course, because of all the folks who need help as Tax Day quickly approaches.

INTU has a decent Quantum Score of 63.8, not far below my optimal buy zone. But things get a little more interesting when we look at the solid Fundamental Score of 70.8.

One- and three-year sales growth are good at 12.9% and 23.5%, respectively. Earnings have also grown in those same periods, and the company has a solid 16.6% profit margin.

The technicals are weaker as the stock as the stock has traded sideways much of this year, and my system has picked up just one Big Money buy signal in the last 90 days.

None of that is horrible, and INTU may do fine in the future. But there are better opportunities out there right now.

Adobe (ADBE)

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I’m including Adobe (ADBE) here because the company markets itself as a tool to make tax prep easy. You can quickly scan and organize tax documents using Adobe Acrobat Pro and Adobe Scan.

It is also well known for other creative apps like Photoshop, Illustrator, Lightroom, and its new tool Firefly, which uses A.I. to instantly add or remove elements from images by using just a few words.

You may look at ADBE and automatically think it’s not a buy based on the less than stellar Quantum Score of 51.7, but there’s more to the story.

Adobe fell 13.7% the day after it reported earnings that beat analysts’ expectations. The “problem” was guidance, which wasn’t spectacular but certainly wasn’t horrible. Management’s earnings forecast was in line with expectations, but sales guidance missed the estimate – by all of 0.6%. 

ADBE is now an interesting stock with a very low Technical Score (38.2), which drags down the Quantum Score. But – and this is the key – the Fundamental Score is still strong at 70.8. This divergence between the fundamentals and technicals rarely lasts, and the fundamentals almost always lead the way forward – which means higher prices.

I like ADBE here, and it is one of my recommendations in TradeSmith Investment Report.

One thing is for sure: the stock market is a great place to invest that refund money. And if you pick the right stocks, you may find you owe more next year.

That sounds bad, but it also means you made more. And that’s what counts.

Happy Tax Season.

Talk soon,

Jason Bodner
Editor, Jason Bodner’s Power Trends

P.S. Ideally, you want to invest in stocks with superior fundamentals, strong technicals, and Big Money inflows.

That’s what has our 18 stocks in TradeSmith Investment Report up 26.9% on average.

Actually, we’re now up to 19 stocks, as I just released my latest recommendation yesterday – a leader in treating two of the biggest health crises in the world today. It makes a couple of drugs that have gotten a lot of buzz recently, and sales have rocketed higher.

To learn more about the company, the opportunity I see, and my recommended buy-up-to price, click here for details on joining TradeSmith Investment Report today. You’ll also receive access to our complete portfolio.