ONE LEVEL DEEPER
TRI
Warren Buffett frameworkThe Owner-OperatorBenjamin Graham frameworkThe Value ArchitectMichael Mauboussin frameworkThe Expectations EngineerHoward Marks frameworkThe Cycle WhispererPeter Lynch frameworkThe Everyday Edge

At 43.6x earnings with 2.43% ROIC versus 5.11% cost of capital, Thomson Reuters generates cash while destroying value.

cautiousLeaning Bearishconviction

This framework sees a cash-rich business trading at 43.6x earnings while destroying value with ROIC below cost of capital — the math of a permanent owner says wait.

THE LENSES
THE OWNER'S MATHexpensive

If you bought this entire business today, would what it earns justify what you paid?

P/E ratio of 43.6x sits at 75th percentile historically
Earnings yield of 0.57% versus 4.33% treasury yield creates negative 3.76% spread
DCF fair value of $175.13 implies 48.5% upside from current $90.19
Market implies 4.0% perpetual growth versus 3.4% trailing growth

The owner's math reveals a paradox — strong cash generation supports a premium, but at 43.6x earnings with yields far below treasuries, the price assumes perfection. The DCF suggests value, but this framework prefers certainty over speculation about future growth acceleration.

Earnings Yield
THE REINVESTMENT TESTdestructive

Can this business deploy capital at high rates of return?

ROIC of 2.43% versus WACC of 5.11% in Q4'25 destroys value
ROIC peaked at 4.94% in Q4'20 but remains below cost of capital
Reinvestment rate data not available in provided metrics
Free cash flow of $2.04B generated despite low returns on capital

This framework sees a fundamental problem — every dollar reinvested earns 2.43% while costing 5.11%, destroying shareholder value. A business that cannot earn its cost of capital lacks the compounding engine this framework seeks.

ROIC vs Cost of Capital
OWNER EARNINGSstrong

What cash does an owner actually get to keep?

Free cash flow of $2.04B generated in trailing twelve months
FCF per share of $1.36 in Q4'25
No stock-based compensation reported, preserving owner earnings
Operating cash flow converts well with minimal capex needs

Owner earnings paint a brighter picture — real cash generation remains strong with no SBC dilution. This framework appreciates businesses that convert earnings to cash, though the question becomes what price to pay for that cash stream.

Free Cash Flow
MANAGEMENT AS STEWARDSconcerning

Are insiders acting as owners or agents?

Buybacks initiated Q2'24 at $222.72 average price, now down 59.5%
$7.4B deployed in repurchases representing 43.7% of OCF in Q4'25
Woodbridge maintains 66.97% ownership providing alignment
No insider trading data available to assess management confidence

Stewardship shows concerning judgment — buybacks at peak prices destroyed billions in shareholder value. While majority ownership provides alignment, the timing reveals either poor market judgment or misplaced optimism about intrinsic value.

Share Buybacks
KEY NUMBERS
VERDICT

Applying this framework reveals Thomson Reuters as a cash-generative business trading at a price that requires faith over facts. With ROIC below cost of capital, margins under extreme pressure, and management destroying value through poor buyback timing, the math favors patience. Strong cash generation provides a floor, but at 43.6x earnings, the market prices in a future this framework cannot see in today's numbers. Would you pay $39 billion for a business earning less than its cost of capital?

This analysis applies Warren Buffett's published investment framework to publicly available financial data. It is not authored by, endorsed by, or affiliated with Warren Buffett. Educational purposes only. Not financial advice.

OTHER PERSPECTIVES
Benjamin Graham framework
The Value Architect
Leaning Bearish
Peter Lynch framework
The Everyday Edge
Leaning Bearish
Michael Mauboussin framework
The Expectations Engineer
Bearish
Howard Marks framework
The Cycle Whisperer
Bearish
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