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Taxing Times for H&R Block

Our new moat rating reflects a fundamental shift in the tax prep business.

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The personal services industry encompasses an array of industries. Under this grouping, we include firms that provide services to consumers, but do not seem to fit the traditional mold of consumer-related names. In this article, we are going to focus on the tax preparation services industry.

As the U.S. tax season winds down, millions of Americans have prepared and sent their returns to the IRS. In the past, the daunting task of filing a tax return motivated many taxpayers to seek professional assistance. Tax filers discovered that the convenience and peace of mind that these tax preparation firms offered them was well worth the few hundred dollars they charged for their services. Thus, tax preparers such as  H&R Block (HRB) and  Jackson Hewitt (JTX) thrived with solid market share, robust revenue growth, and enviable operating margins. However, these results have changed since the early part of the 2000s, with greater competition from traditional and nontraditional players alike.

Vishnu Lekraj does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.