Critical Comparison: H&R Block (NYSE:HRB) versus ADT (NYSE:ADT)

H&R Block (NYSE:HRB) and ADT (NYSE:ADT) are both mid-cap consumer discretionary companies, but which is the superior investment? We will compare the two businesses based on the strength of their dividends, risk, analyst recommendations, earnings, valuation, profitability and institutional ownership.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for H&R Block and ADT, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
H&R Block	1	2	1	1	2.40
ADT	1	4	2	0	2.14

H&R Block currently has a consensus target price of $46.67, suggesting a potential downside of 6.11%. ADT has a consensus target price of $8.13, suggesting a potential upside of 17.40%. Given ADT’s higher possible upside, analysts clearly believe ADT is more favorable than H&R Block.

Risk & Volatility

H&R Block has a beta of 0.38, suggesting that its stock price is 62% less volatile than the S&P 500. Comparatively, ADT has a beta of 1.04, suggesting that its stock price is 4% more volatile than the S&P 500.

Earnings and Valuation

This table compares H&R Block and ADT”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
H&R Block	$3.95 billion	1.54	$733.60 million	$5.72	8.69
ADT	$5.13 billion	0.99	$595.95 million	$0.71	9.75

H&R Block has higher earnings, but lower revenue than ADT. H&R Block is trading at a lower price-to-earnings ratio than ADT, indicating that it is currently the more affordable of the two stocks.

Dividends

H&R Block pays an annual dividend of $1.84 per share and has a dividend yield of 3.7%. ADT pays an annual dividend of $0.22 per share and has a dividend yield of 3.2%. H&R Block pays out 32.2% of its earnings in the form of a dividend. ADT pays out 31.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. H&R Block has increased its dividend for 9 consecutive years and ADT has increased its dividend for 1 consecutive years. H&R Block is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares H&R Block and ADT’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
H&R Block	18.59%	-214.84%	22.56%
ADT	11.85%	18.99%	4.40%

Insider and Institutional Ownership

90.1% of H&R Block shares are held by institutional investors. Comparatively, 87.2% of ADT shares are held by institutional investors. 0.7% of H&R Block shares are held by company insiders. Comparatively, 3.0% of ADT shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Summary

H&R Block beats ADT on 11 of the 18 factors compared between the two stocks.

About H&R Block

H&R Block, Inc. engages in the provision of tax return preparation solutions, financial products and small business solutions. The company was founded by Henry W. Bloch and Richard A. Bloch on January 25, 1955, and is headquartered in Kansas City, MO.

About ADT

ADT Inc. provides security, interactive, and smart home solutions to residential and small business customers in the United States. It operates through two segments, Consumer and Small Business, and Solar. The company provides burglar and life safety alarms, smart security cameras, smart home automation systems, and video surveillance systems. It primarily offers security designed to detect intrusion, control access, sense movement, smoke, fire, carbon monoxide, flooding, temperature, and other environmental conditions and hazards; and address personal medical emergencies, such as injuries or unanticipated falls. The company also provides automation and smart home solutions that allow customers to use their smart phones, smart phone application, or touchscreen panels in their homes to arm and disarm their security systems; record and view real-time video; and creates customized and automated schedules for connected devices; programs systems to react to defined events; integrates system with third-party connected devices, such as cameras, lights, thermostats, appliances, and garage doors, as well as offers monitoring and maintenance services. In addition, the company offers energy storage solutions, energy efficiency upgrades, and roofing services. It offers its products under the ADT, ADT Pulse, ADT+, and ADT Commercial brand names. The company was formerly known as Prime Security Services Parent, Inc. and changed its name to ADT Inc. in September 2017. ADT Inc. was founded in 1874 and is headquartered in Boca Raton, Florida.