Why Thomson Reuters Shares Could Fly to $45

Does this analyst make a good case? Or is it just more noise from Bay Street?

| More on:
The Motley Fool

While Fools should generally take the opinion of Wall Street with a grain of salt, it’s not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades — just in case their reasoning behind the call makes sense.

What: Shares of Thomson Reuters (TSX: TRI)(NYSE: TRI) climbed 2% yesterday morning after TD Securities upgraded the financial information provider from “hold” to “buy”.

So what: Along with the upgrade, analyst Vince Valentini planted a price target of $44 on the stock, representing about 17% worth of upside to Friday’s close. While momentum traders might be turned off by Thomson’s year-to-date price weakness, Valentini’s call could reflect a sense on Bay Street that its long-term growth prospects are becoming too cheap to pass up.

Now what: According to TD Securities, Thomson’s risk/reward trade-off is rather attractive at this point. “Since we last had a Buy rating 18 months ago, we believe that the new senior management team has delivered an impressive array of cost-reduction initiatives and product enhancements, while at the same time global macroeconomic headwinds have gradually eased,” said Valentini. “We are certainly not seeing any tailwinds yet in terms of demand from large financial institutions, and we believe that a return to positive organic revenue growth for the Financial & Risk (F&R) sector is still 12-15 months away, but with enough passage of time, and with the underperformance of TRI shares YTD, we are now willing to recommend that long-term investors get back into the stock.”

When you couple Thomson’s 15-plus P/E ratio with its still-hefty debt load, however, I’d hold out for an even wider margin of safety before buying into that bullishness.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned.

More on Investing

grow dividends
Dividend Stocks

2 Dividend Stocks to Use as Building Blocks for Lasting Wealth

Dividend stocks that are raising their dividends over time could create lasting wealth for investors. Here are a couple of…

Read more »

Glass piggy bank
Dividend Stocks

New Investors: How to Make the RRSP Work for You Now and Not Just in Retirement

The RRSP can work for you in retirement, but it can also bring huge benefits right now for investors looking…

Read more »

Senior couple at the lake having a picnic
Dividend Stocks

Retirees: 2 High-Yielding Dividend Stocks to Buy Today

These TSX dividend-paying stocks can be a retiree’s best friend in their self-directed portfolios for additional income in retirement.

Read more »

money while you sleep
Dividend Stocks

2 Stable Stocks for Sleep-Better Investing

Boasting rock-solid underlying businesses and great financials, these two stable stocks can be perfect holdings for your portfolio.

Read more »

Money growing in soil , Business success concept.
Investing

3 Growth Stocks to Keep Your Eyes on

Growth stocks could make you lots of money, especially if you are able to buy them on sale and hold…

Read more »

Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

After their recent declines, these two Canadian dividend stocks look even more attractive to buy for the long term.

Read more »

Young woman sat at laptop by a window
Investing

Should You Buy Savaria at These Levels?

Given Savaria's solid financials, healthy growth prospects, and attractive valuation, I am bullish on the company.

Read more »

A bull outlined against a field
Investing

These 3 High-Growth Stocks Could Power the Bull Market’s Next Record Run

Are you interested in high-growth stocks? These companies could power the bull market’s next record run!

Read more »