Nobody except those actually working in the business would ever find themselves reading about investor relations. That said, when if you ever wanted to catch up, read the IR Web Report, written by industry veteran Dominic Jones. Occasionally, Jones takes the time to cover stories about Thomson Reuters (NYSE:TRI), the industry's 500-pound gorilla. More often than not, the coverage is muted at best and that's easy to understand. Thomson Reuters IR is quite cookie-cutter. Having said this, I still see a company where the glass is half-full and showing future promise. Here's why.
TUTORIAL: Fundamental Analysis

Stable Ownership
Thomson Reuters is 55%-owned by Toronto-based Woodbridge Company, a holding company for the Thomson family's business interests. According to Forbes, David Thomson, Thomson Reuters Chairman, is the 17th wealthiest person on the planet at $23 billion. Recently, Atlanta hockey fans came to know him when his True North Sports and Entertainment bought the Atlanta Thrashers for $170 million and moved the team to Winnipeg, a city almost one-eighth the size of Atalanta. Crazy move? Not by a long shot. Thomson and his partner Mark Chipman sold 13,000 season tickets in just three days. Ownership, whether it's a massive organization like Thomson Reuters or a team in the National Hockey League, needs to be stable and committed to the future. I believe the Thomson's are absolutely that. (For related reading, see Trade Takeover Stocks With Merger Arbitrage.)

On the Horizon
Large companies have a tendency to accumulate unnecessary baggage, as they get ever bigger. This especially holds true for information-based organizations. In 2009 and 2010, Thomson Reuters acquired or invested in 58 businesses at a cost of $961 million. That's a lot of tiny acquisitions for a company with an enterprise value of $38.4 billion. An example of the rapidity at which these deals take place and how it's virtually impossible to gage their ultimate success or failure is its November 2010 deal to buy GeneGo, a provider of biology and disease information. Less than a year later, it's selling the health care unit to focus on its three remaining segments: legal, tax and accounting, and markets. When Thomson purchased Reuters in 2008 for more than $16 billion in cash and stock, the deal transformed the merged companies into a global player with diversified streams of revenue. Unfortunately, it appears that it's having a difficult time getting beyond the initial benefits. In 2007, Thomson's operating margin without Reuters was 17.8%. Today, it's barely in double-digits. Most of its peers listed below have higher margins. So how exactly is the glass half-full you ask? Once the company and the Thomson family decide what business they want to be in, a game-changing acquisition will happen, not these penny ante variety that have done little to make it grow or deliver higher profitability. (For related reading, see Analyzing An Acquisition Announcement.)

Thomson Reuters and Peers

Company P/S Forward P/E
Thomson Reuters (NYSE:TRI) 2.35 14.07
Pearson plc (NYSE:PSO) 1.64 13.82
McGraw-Hill (NYSE:MHP) 2.01 12.98
Wolters Kluwer NV (OTCBB:WTKWY) 1.28 9.60
Broadridge Financial Solutions (NYSE:BR) 1.28 14.07

Valuation
Thomson Reuter's stock isn't cheap. However, consider this; its stock has traded over the past three years in a range between $25 and $41. In the last year, the range has shrunk to between $36 and $41 and currently trades at the bottom. Only one period (late 2008 to early 2009) in the last 10 years has its stock traded below $30 so the odds of it doing so again without some sort of financial services meltdown very limited. On the other hand, should it get its act together, the upside is very tantalizing. (Learn how to filter out the noise of the market place in order to find a solid way of determining a company's value. For more, see Equity Valuation: In Good Times And Bad.)

Bottom Line
As the economy slows, many pundits are recommending large caps with good dividends as a way to protect against current volatility in the markets. If you are in this camp, you could do a lot worse than Thomson Reuters and its 3.4% yield.

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