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Sundeep Kutumbaka and George Bocchetti. H&R Block, Inc. (HRB) Align Technology, Inc. (ALGN). H&R Block: Recommendation. Buy: Limit at $18 Sell: Stop at $20, Limit at $22. H&R Block: Background. Provides tax, banking, accounting and business consulting services and products - PowerPoint PPT Presentation
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Sundeep Kutumbaka and George Bocchetti
Buy: Limit at $18Sell: Stop at $20, Limit at $22
Provides tax, banking, accounting and business consulting services and products Prepares 1/7 tax returns Had an office within 5 miles of most
Americans Employs more than 110,000 Has helped clients obtain nearly $30 billion in
tax refunds, credits Founded in 1955 Headquartered in Kansas City, MO
Tax Services = 74.3% of revenue Provides tax return preparation services in Unites
States, Canada, Australia Markets TaxCut income tax preparation software
Business Services = 22% of revenue RSM McGladrey, Inc. (RSM) provides accounting,
tax and business consulting services Consumer Financial Services = 3.5% of
revenue provides retail banking offerings through HRB
Bank
Current Price: $18.08 P/E Ratio: 12.07 Beta: 0.49 Dividend/ Yield: $0.15/
3.32% EPS: $1.50 52-Week Low: $13.73 52-Week High: $25.94 Market Cap: $6.60B Institutional Ownership: 85%Taken from http://www.google.com/finance?q=hrb as of 10/04/09
Loss of $130.6 million, or 39 cents per share Vs. loss of $128.4 million, 39 cents per share a
year before Vs. estimates of loss of 37 cents per share
Typically lose in Q1, Q2 and gain in Q3, Q4 Taxes are seasonal: most revenue from Jan-April
Exacerbated by increase in Tax Services expense
Reaffirmed guidance for FY10 Upgraded September 8th, 4 days after release
Largest provider of tax preparation services in the world
Low in their yearly cycle Just beginning to gain
Respected, trusted brand name Compared to unknown competition
Unstoppable business All adults have to file a tax return
Even small tax changes increase business
Multiple markets: US, Canada, Australia
Multiple businesses: Tax services, tax software, banking,
business consulting Cutting down excess businesses
Investment advisement, subprime mortgages
Trying for new public image Revamped, professional storefront More serious advertising campaign▪ Multiple platforms▪ Shareholders at last meeting applauded demo
ad Reduced prices for low-income, young
clients Honor federal college credits Hiring nearly 15,000 tax professionals
Jackson Hewitt Tax Service, Inc (JTX) Market cap of only 135M Less diversified, smaller client base, smaller
market Downgraded at Oppenheimer in August Drop of 13% in tax return volume in 2009
seasonGilman Ciocia, Inc (GTAX)
Serves mostly middle and upper class Only in New Jersey, New York, and Florida
Intuit, Inc (INC) TurboTax software, but no walk-in offices
Our recommendation: Watch and buy on pull back, at Limit of $15
Sell: Stop at $19, Limit at $22
Designs, manufactures, markets Invisalign A method for treating the misalignment of teeth Alternative to visible, cumbersome braces
Invisalign is regulated by FDA as a Class II medical device
Incorporated in 1997 First sales of Invisalign to orthodontists in
1999 By late 2001, manufactured one million
aligners Headquarters in Santa Clara, CA
The Invisalign system is comprised of ClinCheck: creation of digital treatment plans manufacturing of customized Invisalign aligners
Sells Invisalign directly to consumers, dentists, and/or orthodontists
Also sell retainers, ancillary products Cleaning material, adjustment tools for
Invisalign Operates in North America, Europe, Asia-
Pacific, Latin America, and Japan
Invisalign Full Complete, personal treatment
Invisalign Express Pre-made for various categories of treatment
Invisalign Teen Aligner wear indicator to gauge patient
compliance Retention
Vivera retainers for Invisalign/non-Invisalign patients
Ancillary Products Support Invisalign
To date trained more than 56,700 doctors manufactured more than 44 million unique
Invisalign aligners started more than 1,000,000 patients in
treatment reached $1.5 billion in cumulative net revenues complied IP portfolio of more than 160 patents provides exclusive education events at more
than 60 universities worldwide
Current Price: $15.82P/E Ratio: 13.61Beta: 2.12Dividend/ Yield: N/AEPS: $1.1652-Week Low: $4.8852-Week High: $16.45Market Cap: $1.05B Institutional Ownership: 88%Taken from http://www.google.com/finance?q=algn as of 10/15/09
Q2 Earnings Report released July 232
EPS of $0.072
Compared to estimate of $0.012
Revenue of $76.3 million2
Compared to estimate of $69.4 million2
27% increase in international revenue2
Share price rose 14% after release2
Predicted Q3 earnings in current range2
Year Date ActualLast Avg Estimate
$ Surprise
2009 Jun-09 0.07 0.01 0.06
2009 Mar-09 0.04 -0.02 0.06
2008 Dec-08 0.98 0.02 0.96
2008 Sep-08 0.08 0.02 0.06
2008 Jun-08 0.06 0.05 0.01
2008 Mar-08 0.07 0.02 0.05
On a rallyVaried product lineupMultiple markets
North America, Europe, Asia-Pacific, Latin America, and Japan
Over a million existing clients And growing
Upgraded to Buy at Northcoast on Oct 1 Increase in year-over-year case starts
Buy rating reaffirmed at Brean Murray Recently released new features
Based on customer research and treatment data
Make Invisalign effective for more bite types
Ended patent litigation with Danaher Corporation's Subsidiary Ormco Corporation Exclusive agreement to work on
combination orthodontic product Should lead to an increase in sales
Beat estimates in last 6 earnings reports Will probably beat again on October 22nd
3M Company (MMM) Diversified technology company No specific product that competes with
Invisalign▪ Nothing invisible
DENTSPLY International, Inc (XRAY) A few competitive products▪ Not as extensive a lineup
No marketing▪ Not as well-known
ALGN:1. http://www.reuters.com/finance/stocks/companyProfile?rpc=66&symbol=ALGN.O2. http://www.reuters.com/article/rbssHealthcareNews/idUSBNG538028200907233. http://www.orthodonticproductsonline.com/news/2009-09-24_01.asp4. http://www.marketintelligencecenter.com/articles/9625615. http://online.wsj.com/article/BT-CO-20091001-709097.html6. http://www.reuters.com/finance/stocks/keyDevelopments?rpc=66&symbol=ALGN.O×tamp=200908171219007. http://finance.aol.com/earnings/align-technology-inc/algn/nas/earnings-release8. http://finapps.forbes.com/finapps/jsp/finance/compinfo/Earnings.jsp?tkr=ALGN9. http://finance.aol.com/charts/align-technology-inc/algn/nas/classic-charts10. http://www.thestreet.com/quote/ALGN/details/earnings-estimates.html11. http://www.aligntech.com/Pages/About.aspx12. http://www.google.com/finance?q=algn
HRB:1. http://www.hrblock.com/company/index.html2. http://www.google.com/finance?q=hrb3. http://www.reuters.com/finance/stocks/companyProfile?symbol=HRB.N&rpc=664. http://finance.aol.com/charts/block-h-and-r-inc/hrb/nys/classic-charts5. http://finance.aol.com/charts/align-technology-inc/algn/nas/classic-charts 6. http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=BCOM&date=20090904&id=103653177. http://newstribune.com/articles/2009/09/04/business/118biz51blockpr09.txt8. http://finance.aol.com/earnings/block-h-and-r-inc/hrb/nys/earnings-release9. http://industry.bnet.com/financial-services/10003127/ceo-smyth-promises-peace-of-mind-at-hr-block-with-customer-
centric-focus/10. http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=AP&date=20090908&id=1037167211. http://www.herald-dispatch.com/news/x883085341/Tax-credit-available-for-college-costs12. http://www.mlive.com/news/saginaw/index.ssf/2009/09/hr_block_hiring_15000_tax_prep.html13. http://www.huliq.com/1/87094/manager-keep-comcast-h-r-block-and-hasbro-radar14. http://www.seattlepi.com/business/1310ap_us_hr_block_meeting.html15. http://www.google.com/finance?q=OTC:GTAX16. http://www.google.com/finance?q=NASDAQ:INTU17. http://www.google.com/finance?q=NYSE:JTX18. http://www.reuters.com/finance/stocks/companyProfile?symbol=JTX.N&rpc=6619. http://www.iii.co.uk/news/?type=afxnews&articleid=7496335&action=article20. http://caps.fool.com/Blogs/ViewPost.aspx?bpid=223597&t=01003070853754792343