"EBITDA is good, I mean bad."
This is a Symbol Surfing Post from Wed, Jun 13, 2018.
So it is a day later and it seems there is a reason for the 20% post-earnings drop.
Even though HRB beat the current analyst's estimates, the forward guidance for 2019 is lower than expected.
H&R Block shares plunge nearly 20% after new tax law takes 'bite' out of profit forecast
"The shares of the tax preparation company declined 19 percent in early trading Wednesday, a day after it gave a sale guidance range of $3.05 billion to $3.1 billion for its fiscal 2019 versus the Wall Street consensus of $3.14 billion. H&R Block also gave an EBITDA profit margin target range of 24 percent to 26 percent for fiscal 2019, down from the nearly 30 percent EBITDA margin it reported in fiscal 2018."
Apparently, the new tax law has made filing taxes so simple, H&R Block will lose a significant amount of future business.
I'm not convinced of that yet.
Let's look at EBITDA (whatever that is). Jason Bateman's character in The Change-Up has an interesting insight into EBITDA.
The EBITDA guidance is 24% on the low end vs 30%.
So the difference is 6%.
6%/30% = .20 or 20%
So a forecast of a 20% reduction in 2019 EBITDA results caused a 1 day 20% decline in the stock.
That seems a little harsh but this is starting to make sense.
There may be a trading opportunity here but I not willing to make a bet on this right now.
Wed, Jun 13, 2018 HRB @ $24.29