The Greenblatt Magic Formula: How H&R Block, Molina, and Peabody Stack Up for Retirement Investors

The article ranks three Magic Formula stocks for retirement suitability, favoring H&R Block, which trades at 6x trailing and forward P/E, generates a 4.7% yield, and raised its quarterly dividend to $0.42 while authorizing an additional $100 million buyback. Peabody Energy remains highly cyclical despite an 83.8% one-year gain, after a Q1 FY26 EPS miss of $0.26 vs. $0.22 expected and no dividend growth since Q3 2023. Molina Healthcare showed a Q1 2026 EPS beat of $2.35 vs. $1.91, but it pays no dividend and faces Medicaid margin pressure and negative FY2025 operating cash flow of $535 million.

Analysis

The market is pricing these as three very different kinds of value: a commodity beta proxy, a regulated recovery, and a cash-return compounder. The key second-order distinction is that retirement suitability is less about statistical cheapness and more about whether free cash flow can be converted into spendable capital without a recession, regulatory reset, or operational hiccup interrupting the path.

BTU’s move has already pulled forward a lot of the optionality from power-demand narratives, which is exactly when cyclical names become most fragile: consensus shifts from “survive” to “normalize,” and the next disappointment can hit multiple compression faster than earnings recover. MOH’s setup is more interesting than its headline volatility suggests, because the real catalyst is not just a better quarter but whether state-rate repricing can outrun medical-cost trend for two to three reporting cycles; if it cannot, the stock can re-rate lower even with improving EPS. HRB is the only one where capital returns create a self-funding moat: buybacks plus a durable payout mean each quarter of stable earnings mechanically increases per-share cash generation, which matters more than nominal growth for retirees.

The contrarian miss is that the “boring” tax franchise may have the strongest duration-adjusted upside. AI-native tax prep is a real medium-term threat, but adoption curves in consumer finance are usually slow, while the company has enough margin to fund distribution and defend share. By contrast, the market may be underestimating how quickly BTU can give back gains if coal logistics or mine issues recur, and overestimating how cleanly MOH can harvest a Medicaid trough when political rate pressure typically lags cost inflation by several quarters.

Key Decisions for Investors

• Long HRB on any post-earnings consolidation over the next 2-6 weeks; favor a cash-secured put sale or a July/August call spread to capture the dividend and buyback support with limited downside. Risk/reward: mid-single-digit upside from rerating versus low-teens downside only if tax-season execution slips.
• Avoid BTU as a retirement proxy; if holding for momentum, use tight stops or pair long BTU / short an integrated energy or utility substitute to isolate coal optionality. Time horizon: days to weeks, not quarters.
• Initiate a relative-value long HRB / short MOH pair over the next 1-3 months. HRB offers visible capital returns and low beta; MOH needs multiple quarters of regulatory and margin recovery before its valuation gap can close. Risk is a sharp MOH beat on Medicaid rate re-pricing.
• For tactical traders, sell out-of-the-money puts on HRB into strength rather than buying outright after a dividend increase, targeting a 1-2 quarter horizon. This expresses conviction while being paid to wait.
• Do not buy MOH for income portfolios unless paired with a separate dividend source; if long, treat it as a 6-12 month turnaround with earnings event risk, not a retirement hold.