If fears of holding the bag dominate your thinking, then tax consultancy firm H&R Block (HRB) probably won’t make it on your to-buy wish list. At a time when many publicly traded companies collapsed due to severe macroeconomic pressures like inflation, HRB managed to not only jump higher but stratospherically so. In the trailing year, HRB stock gained nearly 77%.

Of course, that’s great news for H&R Block and those that got in before the wave. However, prospective investors may have a different view. After all, the market trades on anticipation of future events, not on past records. From a colloquial perspective of hot and cold streaks, investors might feel more comfortable wagering on last year’s duds rather than gambling on strength continuing to beget more strength.

Certainly, some fundamental factors underline the prudence of a cautious approach to HRB stock. Perhaps most notably, the tax-prep specialist didn’t exactly kill it for its last earnings report. According to Zacks Equity Research, H&R Block “reported mixed first-quarter fiscal 2023 results, with earnings beating the Zacks Consensus Estimate but revenues missing the same.”

Specifically, “[a]djusted earnings per share of 99 cents beat the Zacks Consensus Estimate by 4.8% but declined 26.9% year over year.” On the top line, “[r]evenues of $180 million lagged the consensus estimate by 10.1% and were down 6.6% year over year. The decline in the top line was due to the Advanced Child Tax Credit loaded onto Emerald Cards last year, resulting in a $16.6 million impact in the quarter.”

Since the fiscal Q1 report, HRB stock trades at just a hair above parity. Notably, in the trailing six months, shares declined 2%, reflecting possible tiredness among market participants. Sure enough, H&R Block attracted much attention in the derivatives market but for the wrong reasons.

Interest in Put Options Spike for HRB Stock

Following the close of the Jan. 26 session, HRB stock represented one of the highlights in Barchart.com’s screener for unusual stock options volume. This stat shows the difference between the current volume and the average volume over the past month. Typically, traders utilize this data to determine which stocks may be due for big moves ahead.

Specifically, HRB’s volume level reached 5,196 contracts against an open interest reading of 31,003. Call volume hit 165 contracts versus put volume of 5,031. Further, the delta between the trailing-month average total volume versus the prior session volume came out to 402.03%. The implied volatility (IV) rank hit 57.34%, which indicates the (at the money) average IV relative to the highest and lowest values over the trailing one-year period.

To summarize, IV signifies the expected volatility of a stock over the life of an option. As certain influencing factors for the underlying investment changes, the IV will likely change as well. Further, as demand for an option increases, so too will its IV.

The IV low for HRB stock was 26.02% on March 18, 2022. Two months later on May 10, 2022, HRB hit its IV high of 51.24%. Prospective investors should note that per Barchart.com’s technical analysis gauge, HRB ranks as an average 40% sell. Although somewhat contested, the overall sentiment for shares rate as bearish.

On the other end, analyst sentiment ranks toward the optimistic zone. Three months ago, Wall Street experts pegged HRB stock a “moderate buy,” breaking down as two strong buys, one hold and one strong sell. In the current month, both the consensus and the individual breakdown remains the same.

Finally, HRB’s 60-month beta sits at 0.65, reflecting far lower volatility than the benchmark equities index. That’s not surprising given how much shares soared in 2022.

Don’t Ignore the Gig Economy

Outside of any other context, buying into a stock that nearly doubled in the past year would be a tough proposition. Even tougher still if you include the broader backdrop of recessionary fears. In that case, HRB stock seems destined to make bag holders of prospective investors. However, the burgeoning gig economy cannot be ignored.

True, nobody knows the daily ebb and flow of any security. However, in the long run, as people reject the old paradigm of working – going to an office nine-to-five from Monday to Friday – the gig economy (or network of independent contractors) will likely rise.

However, tax preparations for employees (who receive W-2 statements) and gig workers (who receive 1099 forms) are radically different. From the eyes of the IRS, gig workers are in business for themselves. Therefore, they must prepare “business taxes,” which include granular documentation such as profit and loss statements.

For lifetime W-2 workers, the transition from one tax structure to another could be daunting. Under this scenario, it really pays to speak face-to-face with an expert. Therefore, even with the enormous rise of HRB stock, in the long run, it can still go much higher.

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• Markets Today: Stocks Climb on Tesla Earnings and Reduced U.S. Recession Fears

On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.