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Topic: Growth Stocks

H&R Block Inc. $22 – New York symbol HRB

H&R BLOCK INC. $22 (New York symbol HRB; WSSF Rating: Above average) has attracted several class-action lawsuits in the past few years, mostly related to products and services it sells to its tax-preparation clients. It recently agreed to pay $62.5 million to settle four lawsuits that accused it of hiding the true interest rate on loans made to customers waiting for income tax refunds.

Now it’s fighting charges that fees on a retirement savings plan account it offers exceed interest payments. However, H&R Block says that only happens to customers who make the minimum deposit, and not for those who use this account as intended, to build long-term retirement savings.

The State of New York now wants H&R Block to refund about $360 million to these customers, and pay $250 million in fines. To put that in context, it earned $28.9 million or $0.09 a share in its third fiscal quarter ended January 31, 2006. These results included a $31.7 million or $0.10 a share charge for lawsuits.

This latest lawsuit, along with the news that it will have to restate some prior earnings for accounting errors, have cut the stock by several dollars in the past few weeks. However, we doubt that these events will permanently harm H&R Block’s reputation.

H&R Block is buy for long-term gains.

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