Yahoo Finance Those who invested in Thomson Reuters (TSE:TRI) five years ago are up 159%
When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, you can make far more than 100% on a really good stock. For instance, the price of Thomson Reuters Corporation (TSE:TRI) stock is up an impressive 111% over the last five years. We note the stock price is up 1.7% in the last seven days.
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
See our latest analysis for Thomson Reuters
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During five years of share price growth, Thomson Reuters achieved compound earnings per share (EPS) growth of 1.5% per year. This EPS growth is slower than the share price growth of 16% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth. This optimism is visible in its fairly high P/E ratio of 93.48.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Thomson Reuters has grown profits over the years, but the future is more important for shareholders. This free interactive report on Thomson Reuters' balance sheet strength is a great place to start, if you want to investigate the stock further.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Thomson Reuters the TSR over the last 5 years was 159%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
While it's never nice to take a loss, Thomson Reuters shareholders can take comfort that , including dividends,their trailing twelve month loss of 3.4% wasn't as bad as the market loss of around 6.6%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 21% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Thomson Reuters you should know about.
Of course Thomson Reuters may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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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.
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