Zoom Stock – Did You Participate In Any Of Thomson Reuters’ (TSE:TRI) Fantastic 164% Return ?
The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, you can make far more than 100% on a really good stock. One great example is Thomson Reuters Corporation (TSE:TRI) which saw its share price drive 111% higher over five years. In the last week the share price is up 1.4%.
See our latest analysis for Thomson Reuters
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over half a decade, Thomson Reuters managed to grow its earnings per share at 53% a year. This EPS growth is higher than the 16% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 8.02 also suggests market apprehension.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It is of course excellent to see how Thomson Reuters has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Thomson Reuters’ financial health with this free report on its balance sheet.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Thomson Reuters, it has a TSR of 164% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
Thomson Reuters provided a TSR of 34% over the last twelve months. Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 21% per year over five year. This suggests the company might be improving over time. It’s always interesting to track share price performance over the longer term. But to understand Thomson Reuters better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We’ve identified 4 warning signs with Thomson Reuters (at least 2 which are concerning) , and understanding them should be part of your investment process.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
This article by Simply Wall St is general in nature. 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.
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