Why Thomson Reuters' (TSE:TRI) Shaky Earnings Are Just The Beginning Of Its Problems

Explore Thomson Reuters's Fair Values from the Community and select yours

The market wasn't impressed with the soft earnings from Thomson Reuters Corporation (TSE:TRI) recently. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.

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The Impact Of Unusual Items On Profit

Importantly, our data indicates that Thomson Reuters' profit received a boost of US$196m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. If Thomson Reuters doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Thomson Reuters' Profit Performance

Arguably, Thomson Reuters' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Thomson Reuters' statutory profits are better than its underlying earnings power. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you'd like to know more about Thomson Reuters as a business, it's important to be aware of any risks it's facing. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Thomson Reuters.

This note has only looked at a single factor that sheds light on the nature of Thomson Reuters' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.