Article Link: Cramer’s tax day showdown: Intuit vs. H&R Block
At a time when many investors are scrambling to submit tax returns, Jim Cramer crowned one company the tax king to buy.
“I can’t tell you who to use to actually do your taxes, but we can figure out which of these stocks is the one to buy if you are looking for a play on tax season,” the “Mad Money” host said.
H&R Block and Intuit are the two big players to put to the test. Intuit is the company behind TurboTax, the software used by millions to do taxes online, and also provides software to assist small businesses with accounting and payroll.
On the other hand, H&R Block is the No. 1 player in the industry, with brick and mortar locations to assist customers with taxes in person, and it also has an online business.
“If you are looking for a way to play tax season, I say go with Intuit over H&R Block,” Cramer said. (Tweet This)
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Cramer’s decision came down to the fact that Intuit’s small business division means that it makes money year round. H&R Block’s business is almost entirely seasonal.
So, while H&R Block is the market share leader with 15 percent of the tax industry and Intuit’s TurboTax business has only 8 percent, Cramer still sided with Intuit.
“I think it is really important to note that Intuit only does online tax filing … and when it comes to the tax software category, Intuit’s TurboTax is unrivaled — last year they helped prepare 70 percent of online tax returns,” Cramer said.
Currently Intuit trades at a premium, selling for 23 times next year’s earnings estimates, and H&R Block sells for just 12 times next year’s numbers.
Intuit may seem expensive, but Cramer considered it to be more of a cloud-based software-as-a-service play. Those stocks tend to be very pricey.
And while H&R Block may seem cheap, Cramer noted that the business is not doing well right now.
“I don’t want to call it a value trap, but let’s just say it deserves to trade at a discount,” he said.
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Source: CNN Investing