Hidden value is one of the key factors we examine when we look for top stocks. A company’s brand name is one good example of an underappreciated asset. Balance sheets often fail to assign any value to brands, even household names that have built up multitudes of loyal customers over the years.
Two weeks ago we looked at the value of the brand of Canada’s best known tech company. (View the article here.) Today we examine another company whose strong brand is helping it grow internationally.
THOMSON REUTERS CORP. (Toronto symbol TRI; www.thomsonreuters.com) gets 57% of its revenue and 50% of its earnings by selling news and information to professionals in the banking industry. It also sells specialized information products to clients in the legal, accounting and scientific research fields.
The company was already a well-established specialized information provider before it merged with the Reuters news agency in 2008. That deal gave the combined company even more information to sell. It also cut its reliance on North America.
Thomson Reuters now gets 57% of its revenue from the Americas, followed by Europe (31%) and Asia (12%).
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New product helps businesses protect their brands and trademarks
In addition, the Reuters merger helped the company launch its new Eikon terminals, which deliver real-time news and financial data to securities traders and portfolio managers. The number of Eikon users rose 33% in the fourth quarter of 2012 from the third quarter.
Thomson Reuters is also expanding into new niche industries. For example, it recently purchased MarkMonitor, which helps businesses protect their brands and trademarks on the Internet. That includes shutting down websites that sell counterfeit goods or pirated digital content, like movies.
The stock trades at 14.3 times the $2.12 U.S. a share that Thomson Reuters earned in 2012. The $1.30 U.S. dividend yields 4.2%.
In the latest edition of The Successful Investor, we look at how the reduced spending adopted by banks and other financial institutions during an uncertain global economy could affect Thomson Reuters. We conclude with our clear buy-sell-hold advice on the stock.
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Does the strength of a company’s brand name weigh in its favour when you consider buying the stock? Have you suffered a major disappointment from a company whose performance failed to live up to its well-established reputation? Let us know what you think.