Revenue’s up 5.6% as demand for Thomson Reuters’ legal and tax products grows

Artificial intelligence (AI) is an example of an investment idea that could boost your investment returns—or more likely end up costing you money. All in all, we think that the biggest, surest gains from AI will come from investing in established businesses that are already profitable and growing, and that can gain even more by applying AI to their operations.

Thomson Reuters is already profitably taking advantage of AI and should be among the leaders in the push to extend AI’s use.

While the stock trades at 40.5 times the company’s forward earnings forecast, we feel this relatively high multiple is justified thanks to its strong revenue growth, innovative AI integration, and long-term growth potential.

THOMSON REUTERS CORP. (Toronto symbol TRI; www.thomsonreuters.com) sells specialized information (mainly through electronic channels) to professionals in the legal and tax and accounting fields. It also owns the Reuters news service.

Thomson keeps expanding the use of AI in its offerings. For instance, its Westlaw Precision Australia legal database with AI-Assisted Research builds on existing Westlaw Australia content with generative AI capabilities. The advanced platform lets lawyers simply ask their research question as they would of a trusted colleague. The AI then reviews the vast collection of millions of Australian primary law documents at very high speed.

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The platform also lets Westlaw Precision Australia users find related case law that may be relevant to the primary citation. Thomson is pointing to significant time savings: it reports one lawyer realizing a 30% time saving while another conducted more than two hours of research in five minutes.

Growth Stocks: There’s lots of cash now available for reinvestment

The firm recently sold its remaining stake in London Stock Exchange Group plc (Over-the-counter Pink Sheets symbol LDNXF) for $600 million (all amounts except share price and market cap in U.S. dollars). It acquired those shares in January 2021 when it sold its holding in financial information provider Refinitiv to the LSE.

Meantime, thanks to improving demand for Thomson’s legal and tax information products, revenue in the quarter ended June 30, 2024, rose 5.6%, to $1.74 billion from $1.65 billion a year earlier. Earnings before unusual items fell 4.4%, to $0.85 from $0.88. However, that was mainly due to increased spending on new growth projects, such as incorporating artificial intelligence (AI) features into its products.

Thomson offers a 1.3% yield while trading at a high 40.5 times its forecast earnings for 2025. That’s a high multiple, but we feel the share price is justified by the firm’s solid performance and long-term high-growth potential, especially from its AI opportunities.

Recommendation in The Successful Investor: Thomson Reuters Corp. is a buy.

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Scott Clayton

Scott is an associate editor at TSI Network. He is the lead reporter and analyst for Dividend Advisor, Power Growth Investor and Canadian Wealth Advisor and a member of the Investment Planning Committee. Scott began his investment and financial career working with Pat McKeough at The Investment Reporter in the 1980s. Subsequently, he worked at the Financial Post Corporation Service for 10 years. He joined TSI Network in 1998. He is a Bachelor of Economics graduate of York University, and he also has an M.B.A. from the Schulich School of Business.

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