Monday, June 4, 2012

Thomson Reuters Corp 2

Why are we so fascinated with retirement? See comments blog.

I own this stock of Thomson Reuters Corp (TSX-TRI, NYSE-TRI). I have owned this stock in my trading account since 1985. I have made a return of some 6.83% per year with 3.94% dividend return and 2.89% capital gain. Not a great showing.

The insider trading reports shows a bit of insider buying and a bit of insider selling with net insider buying. This tells us nothing. Also, insiders not only have options, but Deferred Share units and Restricted Share Units. There are lots of these outstanding and insiders have more of them than shares. This includes Directors, but Directors only have Deferred Share Units rather than options. (For information on these, see my for Deferred Stock Units and Restricted Stock units.)

When I look for information on institutional holders, I find separate information for TSX-TRI and NYSE-TRI. For Canada, the information is 419 institutions holding 38% of the shares and US, I find 269 holding 33% of the shares. Since both these are purported to be for June 4, 2012, it would seems quite a lot of these shares are held by institutions.

It is hard to say if there is any overlap in these figures. In any event, for Canada, over the last 3 months there has been a bit of net selling to the tune of 0.3% and for the US, over the past 5 months there has been net selling to the tune of 1.3%. There has been lots of selling and buying and the net results are small. So this information is rather neutral also.

I find that the 5 year median low and high Price/Earnings Ratios on this stock to be, in CDN$, 22.22 and 30.69. The 5 year median low and high P/E Ratios on this stock in US$ is close at 22.05 and 27.72. In CDN$ the current P/E Ratio is 13.6 and in US$ 13.1. For both the current P/E is rather low and shows a cheap stock price.

I get a Graham price of $30.64 CDN$. The low median and high Price/Graham price Ratios are 1.38, 1.57 and 1.75. (Ratios above 1.00 show a higher stock price than Graham price and ratios below 1.00 show a stock price lower than the Graham Price.) The current ratio of 0.92 is lower than the low P/GP Ratio and therefore shows a cheap stock price.

I get a 10 year Price/Book Value Ratio of 1.99. The current P/B Ratio of 1.40 is only 70% of the 10 year ratio and shows a cheap current price. (When the current is less than 80% of the 10 year ratio, you have a cheap stock price.)

The current dividend yield of 4.65 is some33% higher than the 5 year median dividend yield of 3.5% and this also shows a cheap current stock price.

When I look at analysts’ recommendations, I find a lot of analysts following this stock. Their recommendations are Strong Buy, Buy, Hold and Underperform. The vast majority is a Hold and the consensus recommendation would be a Hold. The consensus 12 months stock price is $30.30 US$ and this implies an 18.4% total return. They thought that the stock was underpriced and the current stock price represented a good entry point.

In May a number of analysts increased their 12 months stock price but kept their recommendations of either Hold or Buy. One analyst with a Hold recommendation thought the stock price was high and that because Thomson Reuters’ business is centered on the financial industry, the company will continue to shrink along with the financial world.

Another with a Hold recommendation thought that their industry was consolidating and that the stock price will not go up anytime soon. He thought the dividend as safe. (Some analysts thought that the dividend will go up in 2012 and 2013.)

Because earnings loss was caused by Goodwill write off, a number of analysts have disregarded this and given positive earnings for 2011. I have republished my spreadsheet today showing this information. For the first quarter, the EPS was in the high part of the estimated EPS range.

I have not changed my mind on this stock and I will continue to hold on to my shares in the company. I had bought it for its foreign exposure and therefore for diversification. The need has not gone away and there is no similar company that I like better than this one. As you can see from above, I try to find out why analysts give their various stock recommendations. My analysis shows that the stock is relatively cheap, but different people look at things differently, of course. It is certainly true that the stock has not done well lately, but a lot of stocks are in this position.

Thomson Reuters Corp is the leading source of intelligent information for businesses and professionals. They combine industry expertise with innovative technology to deliver critical information to leading decision-makers. Through more than 50,000 people in over 100 countries, they deliver this must-have insight to the financial, legal, tax and accounting, healthcare and science and media markets, powered by the world’s most trusted news organization. They derive the majority of our revenues from selling electronic content and services to professionals, primarily on a subscription basis. Thomson and Reuters amalgamated in 2008. Its web site is here Thomson Reuters. See my spreadsheet at tri.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

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