Acquisitions Expand Earnings and Risk

Article Excerpt

THOMSON CORP. $46 (Toronto symbol TOC; Conservative Growth Portfolio, Consumer sector; SI Rating: Above average) continues to expand its electronic information operations. It just paid an undisclosed price for MercuryMD, a private company that provides patient data to physicians’ handheld computers. Thanks to growing demand for its electronic information services, Thomson’s income before unusual items in the three months ended March 31, 2006 rose 62.5%, to $0.13 a share (total $84 million) from $0.08 a share ($55 million) a year earlier (all amounts except share price in U.S. dollars). Revenue rose 5.6%, to $1.9 billion from $1.8 billion. Thomson plans to spend between $200 million and $500 million on acquisitions in 2006. Growing through acquisitions is risky, but Thomson tends to target small, profitable firms that enhance its current products and services. Still, the stock is expensive at 28 times earnings. Thomson is a hold. hold…

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