Hook / Thesis
Thomson Reuters (TRI) is a textbook wide-moat information-services business: high switching costs, subscription-based revenue, deep domain products (Westlaw, UltraTax, Reuters News) and steady cash flow. The market recently punished the stock aggressively - the shares now trade roughly in the high-$80s after peaking above $200 in 2025 - creating a clear tactical opportunity for investors who want exposure to durable B2B software-like economics with a healthy dividend.
My trade idea: Buy the dip with a defined entry range, tight stop and staged upside targets. The company reported Q4 2025 EPS of $1.07 (vs. estimate $1.0683) and revenue of $2.009B (slightly below a ~ $2.021B estimate), showing operating resilience even as top-line growth wobbled. Management continues to return cash via an increasing quarterly dividend (most recent declaration $0.655 per share on 02/04/2026). At today's price near $88, the market is pricing a lot of short-term uncertainty. That creates a favorable risk/reward for a disciplined long position.
What Thomson Reuters does and why it matters
Thomson Reuters is a global provider of business information services for legal, tax, accounting, regulatory and media customers. The firm's moat is built on proprietary, curated content and mission-critical workflows that customers are reluctant to displace: Westlaw for legal research, UltraTax for tax preparers, and enterprise risk/compliance offerings for corporate clients. About 75% of revenue comes from the U.S., giving the business exposure to a large professional-services market that values continuity and domain expertise.
Why the market should care: the business behaves more like annuity software than cyclical media. Subscriptions produce recurring revenue, visibility into multi-year contracts is often good, and price increases are tolerated because the products are embedded into legal and tax workflows. That underpins margin stability and a reliable free cash flow profile - the sort of characteristics investors prize when discount rates normalize.
Recent results and hard numbers
Key data points from the most recent public disclosures and market prints:
- Q4 2025 EPS: $1.07 (actual) vs. $1.0683 (estimate) - so essentially in line.
- Q4 2025 Revenue: $2,009,000,000 (actual) vs. ~$2,021,008,081 (estimate) - a modest top-line shortfall.
- Dividend trajectory: the company declared a quarterly dividend of $0.655 on 02/04/2026 (ex-dividend date 02/17/2026, pay date 03/10/2026). That compares to the prior quarterly run-rate of roughly $0.595 in late 2025 and mid-2025, signaling a payout lift.
- Share price: the shares traded near $88.07 on the most recent close and printed intraday trades around $89.50 in the last reported tape; this is materially below mid-2025 highs (~$214 at the peak).
Annualizing the most recent declared quarterly dividend (4 x $0.655 = $2.62) produces an implied yield of roughly ~3.0% at a $88 price point, which is attractive for a high-quality information-services company with durable cash flow.
Valuation framing - what the market is telling us
The dataset does not include a current market capitalization, shares outstanding or forward multiples, so I avoid fabricating a P/E or EV/EBITDA multiple. Instead, look at the price action and cash return profile as a valuation proxy. The stock has re-rated sharply lower from the $180-214 range to the high-$80s. That move implies the market repriced either growth expectations, margin assumptions, or risk premia - or a combination of all three.
Concrete framing: if you value TR as a subscription-style business with mid-single-digit organic growth and high incremental margins, a price rebound toward $120-$150 would reflect a partial multiple normalization and re-anchoring of sentiment. A full recovery to the prior multiple (mid-2025 levels) would push the stock well above $180, but that outcome requires stable top-line reacceleration and confidence that the company can offset short-term headwinds with pricing and product-led demand.
Given the recent revenue miss (Q4 revenue ~$2.009B vs. ~$2.021B est.) and the broader market repricing, the current stock price embeds significant near-term pessimism. For disciplined buyers, that creates a tactical entry window.
Trade plan - actionable and risk-defined
My recommended trade for risk-tolerant, income-focused investors:
- Trade direction: Long (buy the dip)
- Entry range: $84 - $92 (scale in; primary size at $88)
- Initial stop: $78 (protect capital; below the recent intraday volatility and structural technical support zone)
- Targets / take-profit:
- Target 1 (near-term, 1-3 months): $120 - trim 25% of position (mean-reversion + sentiment stabilization)
- Target 2 (6-12 months): $150 - sell another 35% if fundamentals reaccelerate and guidance/renewal metrics improve
- Target 3 (buy-and-hold / discretionary): $190+ - only for long-term conviction holders if growth and margin story return to mid-2025 levels
- Position sizing: keep any single-trade exposure to 2-4% of portfolio value; use staggered buys across $84-$92 to average cost.
Catalysts that could drive a move higher
- Post-earnings stabilization and clearer Q1 2026 guidance - investors hate uncertainty; a credible outlook and visible renewal metrics would re-rate the shares.
- Continued dividend increases or an acceleration of buybacks. Management has shown a willingness to return cash and recently declared a larger quarterly dividend on 02/04/2026.
- Macro tailwinds in legal/tax spend or increased billing rates at client firms that translate into higher enterprise renewals and price tolerance.
- Product-led growth from AI/data analytics initiatives and the expanding addressable market for business information - the market for business information is projected to grow materially over the medium term, supporting secular upside.
Risks and counterarguments
This is not a risk-free trade. Below are the principal downside scenarios and a candid counterargument to the buy-the-dip thesis.
- Risk - growth slowdown: If subscription revenues decelerate more than the market anticipates (higher churn or lower new bookings), multiple contraction could continue and push the stock below our stop.
- Risk - margin pressure: Investments in AI and product development, or pricing pressure from competition, could compress margins and reduce free cash flow conversion.
- Risk - macro and legal budgets: A sharp macro slowdown could lead law firms and corporate legal/tax departments to delay upgrades, trimming near-term revenue visibility.
- Risk - FX and Canada/US dynamics: Although ~75% of revenue is US-based, FX swings or specific regional headwinds could affect reported results and investor sentiment.
- Counterargument: The share-price drop may reflect a more structural reassessment of demand for legacy legal/tax workflows if incumbent customers accelerate migration to lower-cost point solutions. If that happens, the revenue base could be more vulnerable than it appears, and a buy-the-dip stance risks catching a falling knife. Investors should monitor renewal rates and large-client retention metrics closely.
What would change my mind
I would stop buying and move to neutral/avoid if any of the following occur: a) management discloses persistent double-digit declines in renewal rates or elevated churn among enterprise accounts; b) guidance is pulled repeatedly or the company stops raising the dividend and shifts to defensive cash preservation; c) large-scale competitive losses in a key product such as Westlaw or UltraTax are announced; or d) the company materially increases leverage without a clear path to higher returns.
Conversely, I would add aggressively if Thomson Reuters reports clear evidence of subscription reacceleration, better-than-expected renewal metrics, or a strategic catalyst (accretive tuck-in acquisition or a meaningful buyback program) that demonstrates confidence in future cash flow.
Bottom line
Thomson Reuters is a durable, wide-moat information-services company with subscription-like cash flows and an improving dividend profile. The recent near-term sell-off after an essentially in-line EPS print and a slight revenue miss has created a tactical buying window. Treat this as a risk-defined trade: buy in the $84-$92 band, keep an initial stop at $78, and scale out into strength with intermediate targets at $120 and $150. Monitor renewal metrics, guidance and dividend actions closely - those are the true signals that will determine whether this dip is a buying opportunity or the start of a longer re-rating.
Disclosure: This is a trade idea, not individualized investment advice. Confirm position sizing and suitability before acting.