Stock of the Week: Thomson Reuters

Media and publishing giant has gone from strength to strength after Thomson bought Reuters in 2008

James Gard 10 September, 2021 | 11:36AM
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With pupils and students heading back into education this week, we asked our Twitter followers to choose among listed publishing giants. They’ve voted for Canadian media and data conglomerate Thomson Reuters (TRI), which has just edged out France’s Lagardère (MMB) in our stock of the week poll.

Thomson Reuters has a relatively short history as a public company after Canada’s Thomson bought the UK’s Reuters in 2008. But its constituent parts have long pedigrees, in particular the Reuters news agency, which traces its roots back to 1850s London. The combined group is now headquarted in Canada, where the C$74 billion business is listed. In a world where data and technology are highly prized, Thomson Reuters has a suite of products for tax and legal professionals, while Reuters provides real-time news and data to the finance industry. The firm also prints legal and tax textbooks which will be used by new students this term and later in their careers – “Norton Bankruptcy Law and Practice” will be familiar to many US law students and practitioners, for example. Competitors include FTSE 100 company RELX (REL), which owns legal data portal LexisNexis, and Wolters Kluwer (WKL). In terms of news and market data provision, Bloomberg has emerged as a challenger to Reuters in recent decades.

Thomson Reuters Share Price Chart

Thomson Reuters share price chart

Thomson Reuters sold a 45% stake in Refinitiv to London Stock Exchange Group (LSEG), a deal which went through earlier this year and gave the media giant a 82 million share stake in the UK stock exchange too. (Read more on what our analysts think of the Refinitiv deal from LSE’s point of view). Morningstar’s Rajiv Bhatia is positive about the Refinitiv spin-off for Thomson Reuters. “Since deciding to spin off its Refinitiv financial and risk operations to London-based LSE Group, we believe the firm has gained more focus. Some of its past offerings have been clunky, and we believe efforts to streamline its business should lead to meaningful margin expansion and higher retention in the years ahead,” he says. He adds that the group’s legal offerings are the “crown jewel”, especially legal research service WestLaw, which is seen as a critical service by many (deep-pocketed) law firms. Corporate and tax/accounting make up the group’s other key divisions, because Reuters “operates with razor-thin margins” in a highly competitive industry.

As the share price for the last 25 years shows, Thomson Reuters has proved a profitable one for investors, with a strong increase since 2008 from C$50 to C$150 in 2021. Like rivals RELX (2 stars) and Wolters Kluwer (1 star), Thomson Reuters shares (2 stars) are considered to be overvalued by Morningstar analysts. The fair value estimate for the shares is C$128 and the company has a narrow economic moat. In his latest analyst note from August 2021, Morningstar’s Bhatia looks ahead at the risks and opportunities for Thomson Reuters in the future. Increasing regulatory complexity across the world means that there will growing demand for a historical library of data of the sort provided by Thomson Reuters. But the company is still tied to legacy financial assets via its stake in the LSE, which can be a highly cyclical business that depends on trading volumes of the level seen in 2020.

             

 

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James Gard  is content editor for Morningstar.co.uk

 

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