Valued at a market cap of $120 billion, Thomson Reuters (TSX:TRI) is among the many largest firms in Canada. Within the final 10 years, TRI inventory has returned greater than 500% to shareholders after adjusting for dividend reinvestments. On this interval, the TSX index has returned “simply” 140% in dividend-adjusted positive factors.
Let’s see if this blue-chip TSX inventory trades at an inexpensive valuation in Could 2025 and if it could proceed to ship outsized positive factors over the subsequent 5 years.
Is that this TSX inventory purchase proper now?
Thomson Reuters is a world content material and expertise firm working by way of 5 segments: Authorized Professionals, Corporates, Tax & Accounting Professionals, Reuters Information, and International Print. It gives analysis instruments, workflow options, information providers, and synthetic intelligence (AI)-powered applied sciences to regulation corporations, governments, companies, accounting professionals, and media organizations worldwide.
Thomson Reuters continues to exhibit robust efficiency in 2025, with its strategic give attention to content-driven expertise fueling regular progress throughout its core segments. The Canadian big reported 6% natural income progress within the first quarter (Q1), with the “Large 3” segments (Authorized, Company, and Tax & Accounting) rising at a powerful 9%.
CEO Steve Hasker emphasised that 90% of Thomson Reuters’s enterprise consists of content-enabled software program serving the authorized, tax, accounting, and compliance professions. This focus has remodeled the income combine, with merchandise rising at double-digit charges, now accounting for 25% of whole income, up from simply 11% in 2019.
The corporate’s funding in generative AI is paying dividends, with 20% of its annualized contract worth now coming from GenAI-enabled merchandise. Thomson Reuters is investing $200 million yearly in AI capabilities, cut up between working bills and capital expenditures. Latest AI-driven acquisitions like Casetext (CoCounsel), SurePrep, SafeSend, and Materia are performing properly and strengthening its aggressive place.
Regardless of market uncertainty round tariffs and different financial headwinds, Thomson Reuters has not skilled any modifications within the demand atmosphere. Its resilient enterprise mannequin, with over 80% recurring income and a extremely diversified buyer base offering non-discretionary merchandise, positions TRI properly for numerous financial situations.
Administration confidently reaffirmed its full-year 2025 steering, projecting over 7% natural progress, with the large three segments rising roughly 9%. Thomson Reuters anticipates adjusted EBITDA margins of roughly 39%, up 75 foundation factors from 2024.
Is Thomson Reuters inventory undervalued proper now?
With $10 billion in capital capability by way of 2027 and a web leverage ratio of simply 0.6 instances, Thomson Reuters is well-positioned to pursue strategic acquisitions. It also needs to keep its dedication to return 75% of free money circulate to shareholders by way of dividends and share repurchases. The corporate just lately elevated its dividend by 10% for the fourth consecutive 12 months.
Analysts anticipate the TSX inventory to extend gross sales from $7.26 billion in 2024 to $9.76 billion in 2029. Comparatively, adjusted earnings are forecast to broaden from $3.77 per share to $6.11 per share.
Thomson Reuters inventory presently trades at a trailing price-to-earnings a number of of over 70 instances, which is kind of steep. Even when TRI inventory trades at 50 instances trailing earnings, it is going to be priced at $305 in Could 2030, above the present buying and selling worth of $267.
Given the lofty valuation of the TSX inventory, Thomson Reuters will doubtless underperform the broader markets within the close to time period.
