) to 'in-line' from 'underperform.'
Analyst Michael Hodes says the upgrade is largely valuation driven, but also reflects modestly less concern around the company's poor client growth this past tax season. On a valuation basis, the shares now trade at about 12 times his $3.10 fiscal year 2004 EPS estimate, a level that appears reasonable given the recent move in mortgage finance stocks. Furthermore, the shares have fallen about 16% since Apr. 2, and he expects news flow driven pressure to subside now that the tax season is over.
Lastly, on client growth, the backdrop is somewhat more encouraging with the IRS now showing a 2.8% drop in returns received through Apr. 25.