The calculations below outline how an intrinsic value for Thomson Reuters is arrived at using the Excess Return Model. This approach is used for finance firms where free cash flow is difficult to estimate.
In the Excess Return Model the value of a firm can be written as the sum of capital invested currently in the firm and the present value of excess returns that the firm expects to make in the future.
The model is sensitive to the Return on Equity of the company versus the Cost of Equity, how these are calculated is detailed below the main calculation.
Note the calculations below are per share.
See our documentation to learn about this calculation.
Excess Returns = (Stable Return on equity – Cost of equity) (Book Value of Equity per share)
$0.45 = (10.9% – 8.43%) * $18.13)
Terminal Value of Excess Returns = Excess Returns / (Cost of Equity - Expected Growth Rate)
$7.12 = $0.45 / (8.43% - 2.13%)
Value of Equity = Book Value per share + Terminal Value of Excess Returns
$25.25 = $18.13 + $7.12Inputs used in model:
Stable EPS = Stable Book Value * Return on Equity
$1.98 = $18.13 * 10.9%
Source: Last reported Return on Equity.
Book Value of Equity per Share: $18.13
Source: Weighted future Book Value estimates from 2 analysts.
Expected Growth Rate: 2.13%
Source: Risk Free Rate/ 10 year Government Bond Rate in CAD.
Value per share (USD): $25.25Exchange rate USD/CAD = 1.273
Value per share (CAD): CA$32.13
Current discount (share price of CA$50.58): -57.4%
The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.
Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)
Discount rate = 8.43% = 2.13% + (0.8 * 7.87%)
The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm). Note the market value of equity is used not the book value (CA$35,980,939,420).
Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))
0.675 = 0.568 (1 + (1- 26.5%) (25.72%))
Levered Beta used in calculation = 0.8
Mr. Stephane Bello has been the Chief Financial Officer and Executive Vice President at Thomson Reuters Corporation since January 1, 2012. He has been also Interim Chief Executive Officer and President of Thomson Reuters Corporation since February 13, 2018. Mr. Bello served as the Chief Financial Officer of the Professional division at Thomson Reuters Corporation from April 2008 to December 2011 and served as its Senior Vice President and Treasurer since joining it in 2001 until April 2008, with responsibility for its global treasury operations, risk management, capital markets and mergers and acquisitions activities. He served as Senior Vice President and Treasurer of Selkirk Financial Technologies, Inc. Prior to joining Thomson, he held various positions in the treasury department of General Motors. From 1994 to 1996, he was responsible for General Motors’ investor relations program and from 1996 to 1999, he served as its regional treasurer in Europe. Immediately prior to joining Thomson, he served as assistant treasurer in GM’s New York treasurer’s office where he was responsible for capital markets activities, foreign exchange and commodities hedging, overseas financing as well as the European and Asia-Pacific treasury centers. He is fluent in French, Spanish and English. Mr. Bello holds a degree in Law and a special degree in Economic Law from the University of Brussels (Belgium).
Average tenure and age of the Thomson Reuters management team in years:
Average tenure and age of the Thomson Reuters board of directors in years:
Focusing on data points such as book values, along with the return and cost of equity, is practical for estimating TRI’s value. … The returns above the cost of equity is known as excess returns: Excess Return Per Share = (Stable Return On Equity – Cost Of Equity) (Book Value Of Equity Per Share) = (10.9% – 8.43%) * $18.59 = $0.46 We use this value to calculate the terminal value of the company, which is how much we expect the company to continue to earn every year, forever. … This is a common component of discounted cash flow models: Terminal Value Per Share = Excess Return Per Share / (Cost of Equity – Expected Growth Rate) = $0.46 / (8.43% – 2.13%) = $7.3 Putting this all together, we get the value of TRI’s share: Value Per Share = Book Value of Equity Per Share + Terminal Value Per Share = $18.59 + $7.3 = CA$33.13 Given TRI's current share price of $50.85, TRI is , at this time, priced higher than its intrinsic value.Simply Wall St - – Full article
Formula Price-Earnings Ratio = Price per share ÷ Earnings per share P/E Calculation for TRI Price per share = $40.07 Earnings per share = $1.942 ∴ Price-Earnings Ratio = $40.07 ÷ $1.942 = 20.6x The P/E ratio itself doesn’t tell you a lot; however, it becomes very insightful when you compare it with other similar companies. … For example, if you accidentally compared lower growth firms with TRI, then TRI’s P/E would naturally be higher since investors would reward TRI’s higher growth with a higher price. … Alternatively, if you inadvertently compared riskier firms with TRI, TRI’s P/E would again be higher since investors would reward TRI’s lower risk with a higher price as well.Simply Wall St - – Full article
View our latest analysis for Thomson Reuters Despite a decline, did TRI underperform the long-term trend and the industry? … This shows that, on average, Thomson Reuters has been able to improve its earnings over the past few years. … Let's take a look at if it is only due to industry tailwinds, or if Thomson Reuters has seen some company-specific growth.Simply Wall St - – Full article
According to my valuation model, Thomson Reuters seems to be fairly priced at around 18% above my intrinsic value, which means if you buy Thomson Reuters today, you’d be paying a relatively fair price for it. … Thomson Reuters’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. … Will you have enough confidence to invest in the company should the price drop below its fair value?Simply Wall St - – Full article
TSX:TRI Intrinsic Value Dec 19th 17 Deriving TRI's True Value The key belief for this model is, the value of the company is how much money it can generate from its current level of equity capital, in excess of the cost of that capital. … The returns in excess of cost of equity is called excess returns: Excess Return Per Share = (Stable Return On Equity – Cost Of Equity) (Book Value Of Equity Per Share) = (14.01% – 8.43%) * $17.91 = $1.03 Excess Return Per Share is used to calculate the terminal value of TRI, which is how much the business is expected to continue to generate over the upcoming years, in perpetuity. … This is a common component of discounted cash flow models: Terminal Value Per Share = Excess Return Per Share / (Cost of Equity – Expected Growth Rate) = $1.03 / (8.43% – 2.13%) = $16.29 These factors are combined to calculate the true value of TRI's stock: Value Per Share = Book Value of Equity Per Share + Terminal Value Per Share = $17.91 + $16.29 = CA$44.46 Relative to today's price of $56.9, TRI is currently overvalued.Simply Wall St - – Full article
See our latest analysis for TRI Breaking down ROE — the mother of all ratios Return on Equity (ROE) is a measure of TRI’s profit relative to its shareholders’ equity. … Return on Equity = Net Profit ÷ Shareholders Equity ROE is assessed against cost of equity, which is measured using the Capital Asset Pricing Model (CAPM) – but let’s not dive into the details of that today. … This is called the Dupont Formula: Dupont Formula ROE = profit margin × asset turnover × financial leverage ROE = (annual net profit ÷ sales) × (sales ÷ assets) × (assets ÷ shareholders’ equity) ROE = annual net profit ÷ shareholders’ equity TSX:TRI Last Perf Dec 8th 17 Essentially, profit margin shows how much money the company makes after paying for all its expenses.Simply Wall St - – Full article
TRI’s P/E of 29.9x is higher than its industry peers (14.2x), which implies that each dollar of TRI’s earnings is being overvalued by investors. … For example, if you accidentally compared lower growth firms with TRI, then TRI’s P/E would naturally be higher since investors would reward TRI’s higher growth with a higher price. … Alternatively, if you inadvertently compared riskier firms with TRI, TRI’s P/E would again be higher since investors would reward TRI’s lower risk with a higher price as well.Simply Wall St - – Full article
Have you been waiting for Thomson Reuters Corporation's (TSX:TRI) upcoming dividend of CA$0.35 per share? … Check out our latest analysis for Thomson Reuters 5 checks you should do on a dividend stock When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas: Does it pay an annual yield higher than 75% of dividend payers? … Compared to its peers, Thomson Reuters produces a yield of 3.10%, which is high for capital markets stocks but still below the market's top dividend payers.Simply Wall St - – Full article
Thomson Reuters Corporation provides news and information for professional markets worldwide. The company operates through three segments: Financial & Risk, Legal, and Tax & Accounting. It sells electronic content and services to professionals primarily on a subscription basis. The Financial & Risk segment offers critical news, information, and analytics enabling transactions and connecting communities of trading, investment, financial, and corporate professionals. This segment also provides regulatory and operational risk management solutions. The Legal segment offers critical online and print information, decision tools, and software and services to support legal, investigation, business, and government professionals. The Tax & Accounting segment provides integrated tax compliance and accounting information, software, and services for professionals in accounting firms, corporations, law firms, and government. Thomson Reuters Corporation also operates Reuters, which provides real-time multimedia news and information services to newspapers, television and cable networks, radio stations, and Websites. The company was formerly known as The Thomson Corporation and changed its name to Thomson Reuters Corporation in April 2008. Thomson Reuters Corporation was founded in 1799 and is based in Toronto, Canada.
|Name:||Thomson Reuters Corporation|
Thomson Reuters Corporation
333 Bay Street,
Ontario, M5H 2R2,
|Exchange Symbol||Ticker Symbol||Security||Exchange||Country||Currency||Listed on|
|TSX||TRI||Corporation Common Shares||The Toronto Stock Exchange||CA||CAD||06. Jun 1989|
|NYSE||TRI||Corporation Common Shares||New York Stock Exchange||US||USD||06. Jun 1989|
|DB||TOC||Corporation Common Shares||Deutsche Boerse AG||DE||EUR||06. Jun 1989|
|LSE||0VKQ||Corporation Common Shares||London Stock Exchange||GB||CAD||06. Jun 1989|
|Financial Exchanges and Data|
|Company Analysis updated:||2018/04/23 00:11|
|Last estimates confirmation:||2018/04/20|
|Last earnings update:||2017/12/31|
|Last annual earnings update:||2017/12/31|
All dates in UTC. All financial data provided by Standard & Poor’s Capital IQ.
Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.