1 Growth Stock With Legit Potential to Outperform the Market

Identifying the stocks that have outperformed the market (in the past) is relatively easy, but selecting the ones that will continue with this trend can be a bit challenging.

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At any given time, there are dozens, if not hundreds, of growth stocks that are outperforming the market. The choices are aplenty when the market is bearish, but there are outperformers in bull markets as well.

However, selecting growth stocks that are not just outperforming the market right now but might continue to do so in the future can be challenging. One such prospect is Thomson Reuters (TSX:TRI), which has grown over 20% compared to the market’s 6.8% in 2024 (so far).

The company

While there are several ways to title Thomson Reuters, ranging from a news company to the “answer company,” two things have been at the core of this company since day one—news and insights. Its business model has evolved from what it originally started as, but it still retains its news roots. Nowadays, most of its revenue comes from the specialized services it offers to various industries.

It caters to multiple industries and lends them its expertise and access to proprietary tools and knowledge bases. The company’s three major target markets are legal professionals, corporations, and tax and accounting professionals. In the first quarter of 2024, revenue from these three market segments made up over 82% of the total company revenue.

The company also experienced solid revenue growth (year over year) and is expected to remain on this growth track in the future.  

The future

Thomson Reuters has outperformed the market almost consistently over the past decade, rising by about 417% over that period. If we add in the dividends, the total returns over the last 10 years rise to 660%. The dividends are another reason to consider this stock. Even though the yield is usually relatively low (less than 1% right now), the dividend growth is quite generous and consistent.

Many of the things that have sustained or driven the company’s growth till now are unlikely to change in the future. The company is still counted among one of the most trusted sources for useful insights and has several proprietary tools and technologies under its banners that are used extensively by professionals in the legal and tax industry.

Also, even though it’s not a tech stock per se, the company also has the credentials to ride the artificial intelligence (AI) hype train since it deals with what AI models are trained on — i.e., data. If it manages to capitalize on the AI boom the right way, that alone may be enough for the stock to outperform the market in the future.

Foolish takeaway

Thomson Reuters has a solid performance history and is an established Dividend Aristocrat. It’s also one of the largest publicly traded companies in Canada, with a market capitalization of $104 billion. So, its stability stems not just from its history but also from its magnitude and reach.

Unless we see a fundamental change in its business model or a significant decline in its financials, Thomson Reuters has a legitimate potential to outperform the market.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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