Intrinsic value of Thomson Reuters Corporation - TRI

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$58.92

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$58.92

 
Intrinsic value

$53.46

 
Up/down potential

-9%

 
Rating

hold

 
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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of TRI stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 42.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -0.81
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  15,086
  15,388
  15,742
  16,146
  16,600
  17,104
  17,656
  18,257
  18,908
  19,609
  20,362
  21,167
  22,026
  22,941
  23,913
  24,944
  26,037
  27,195
  28,418
  29,711
  31,076
  32,517
  34,036
  35,637
  37,324
  39,101
  40,972
  42,941
  45,013
  47,193
  49,486
Variable operating expenses, $m
 
  13,256
  13,516
  13,813
  14,146
  14,516
  14,921
  15,363
  15,841
  16,356
  16,908
  15,542
  16,173
  16,845
  17,559
  18,316
  19,119
  19,968
  20,867
  21,816
  22,819
  23,876
  24,992
  26,168
  27,406
  28,711
  30,085
  31,531
  33,052
  34,653
  36,337
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  13,208
  13,256
  13,516
  13,813
  14,146
  14,516
  14,921
  15,363
  15,841
  16,356
  16,908
  15,542
  16,173
  16,845
  17,559
  18,316
  19,119
  19,968
  20,867
  21,816
  22,819
  23,876
  24,992
  26,168
  27,406
  28,711
  30,085
  31,531
  33,052
  34,653
  36,337
Operating income, $m
  1,878
  2,132
  2,226
  2,333
  2,454
  2,588
  2,735
  2,894
  3,067
  3,254
  3,454
  5,625
  5,853
  6,096
  6,354
  6,628
  6,919
  7,226
  7,551
  7,895
  8,258
  8,640
  9,044
  9,470
  9,918
  10,390
  10,887
  11,410
  11,961
  12,540
  13,150
EBITDA, $m
  3,975
  4,853
  4,965
  5,092
  5,236
  5,394
  5,569
  5,758
  5,964
  6,185
  6,422
  6,676
  6,947
  7,235
  7,542
  7,867
  8,212
  8,577
  8,963
  9,371
  9,801
  10,256
  10,735
  11,240
  11,772
  12,332
  12,922
  13,543
  14,197
  14,885
  15,608
Interest expense (income), $m
  469
  365
  382
  401
  422
  447
  474
  503
  535
  570
  608
  648
  691
  737
  786
  838
  894
  952
  1,014
  1,080
  1,149
  1,222
  1,299
  1,381
  1,467
  1,557
  1,652
  1,752
  1,858
  1,969
  2,086
Earnings before tax, $m
  1,401
  1,767
  1,844
  1,933
  2,032
  2,141
  2,261
  2,391
  2,532
  2,683
  2,846
  4,976
  5,161
  5,359
  5,568
  5,790
  6,025
  6,274
  6,537
  6,815
  7,109
  7,418
  7,745
  8,089
  8,451
  8,833
  9,235
  9,658
  10,103
  10,571
  11,064
Tax expense, $m
  -20
  477
  498
  522
  549
  578
  610
  646
  684
  725
  768
  1,344
  1,394
  1,447
  1,503
  1,563
  1,627
  1,694
  1,765
  1,840
  1,919
  2,003
  2,091
  2,184
  2,282
  2,385
  2,493
  2,608
  2,728
  2,854
  2,987
Net income, $m
  4,186
  1,290
  1,346
  1,411
  1,483
  1,563
  1,650
  1,746
  1,848
  1,959
  2,077
  3,633
  3,768
  3,912
  4,065
  4,227
  4,398
  4,580
  4,772
  4,975
  5,189
  5,415
  5,654
  5,905
  6,169
  6,448
  6,742
  7,050
  7,375
  7,717
  8,077

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3,290
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  37,630
  35,052
  35,858
  36,779
  37,814
  38,961
  40,218
  41,588
  43,071
  44,668
  46,382
  48,216
  50,173
  52,257
  54,471
  56,821
  59,311
  61,947
  64,734
  67,679
  70,789
  74,070
  77,531
  81,178
  85,021
  89,069
  93,330
  97,816
  102,536
  107,502
  112,725
Adjusted assets (=assets-cash), $m
  34,340
  35,052
  35,858
  36,779
  37,814
  38,961
  40,218
  41,588
  43,071
  44,668
  46,382
  48,216
  50,173
  52,257
  54,471
  56,821
  59,311
  61,947
  64,734
  67,679
  70,789
  74,070
  77,531
  81,178
  85,021
  89,069
  93,330
  97,816
  102,536
  107,502
  112,725
Revenue / Adjusted assets
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
Average production assets, $m
  11,472
  11,695
  11,964
  12,271
  12,616
  12,999
  13,418
  13,875
  14,370
  14,903
  15,475
  16,087
  16,740
  17,435
  18,174
  18,958
  19,788
  20,668
  21,598
  22,581
  23,618
  24,713
  25,867
  27,084
  28,366
  29,717
  31,139
  32,635
  34,210
  35,867
  37,610
Working capital, $m
  97
  -1,631
  -1,669
  -1,711
  -1,760
  -1,813
  -1,872
  -1,935
  -2,004
  -2,079
  -2,158
  -2,244
  -2,335
  -2,432
  -2,535
  -2,644
  -2,760
  -2,883
  -3,012
  -3,149
  -3,294
  -3,447
  -3,608
  -3,778
  -3,956
  -4,145
  -4,343
  -4,552
  -4,771
  -5,002
  -5,246
Total debt, $m
  10,076
  8,876
  9,317
  9,821
  10,387
  11,014
  11,702
  12,452
  13,263
  14,136
  15,074
  16,077
  17,148
  18,287
  19,499
  20,784
  22,146
  23,588
  25,113
  26,724
  28,425
  30,219
  32,112
  34,107
  36,210
  38,424
  40,755
  43,208
  45,790
  48,507
  51,364
Total liabilities, $m
  20,373
  19,173
  19,614
  20,118
  20,684
  21,311
  21,999
  22,749
  23,560
  24,433
  25,371
  26,374
  27,445
  28,584
  29,796
  31,081
  32,443
  33,885
  35,410
  37,021
  38,722
  40,516
  42,409
  44,404
  46,507
  48,721
  51,052
  53,505
  56,087
  58,804
  61,661
Total equity, $m
  17,257
  15,878
  16,244
  16,661
  17,130
  17,649
  18,219
  18,839
  19,511
  20,235
  21,011
  21,842
  22,728
  23,672
  24,675
  25,740
  26,868
  28,062
  29,325
  30,659
  32,067
  33,554
  35,121
  36,774
  38,515
  40,348
  42,279
  44,311
  46,449
  48,698
  51,064
Total liabilities and equity, $m
  37,630
  35,051
  35,858
  36,779
  37,814
  38,960
  40,218
  41,588
  43,071
  44,668
  46,382
  48,216
  50,173
  52,256
  54,471
  56,821
  59,311
  61,947
  64,735
  67,680
  70,789
  74,070
  77,530
  81,178
  85,022
  89,069
  93,331
  97,816
  102,536
  107,502
  112,725
Debt-to-equity ratio
  0.584
  0.560
  0.570
  0.590
  0.610
  0.620
  0.640
  0.660
  0.680
  0.700
  0.720
  0.740
  0.750
  0.770
  0.790
  0.810
  0.820
  0.840
  0.860
  0.870
  0.890
  0.900
  0.910
  0.930
  0.940
  0.950
  0.960
  0.980
  0.990
  1.000
  1.010
Adjusted equity ratio
  0.407
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4,186
  1,290
  1,346
  1,411
  1,483
  1,563
  1,650
  1,746
  1,848
  1,959
  2,077
  3,633
  3,768
  3,912
  4,065
  4,227
  4,398
  4,580
  4,772
  4,975
  5,189
  5,415
  5,654
  5,905
  6,169
  6,448
  6,742
  7,050
  7,375
  7,717
  8,077
Depreciation, amort., depletion, $m
  2,097
  2,721
  2,739
  2,759
  2,782
  2,807
  2,834
  2,864
  2,896
  2,931
  2,968
  1,051
  1,094
  1,140
  1,188
  1,239
  1,293
  1,351
  1,412
  1,476
  1,544
  1,615
  1,691
  1,770
  1,854
  1,942
  2,035
  2,133
  2,236
  2,344
  2,458
Funds from operations, $m
  4,056
  4,011
  4,085
  4,170
  4,265
  4,370
  4,485
  4,609
  4,744
  4,890
  5,046
  4,684
  4,862
  5,051
  5,252
  5,466
  5,692
  5,931
  6,184
  6,451
  6,733
  7,031
  7,344
  7,675
  8,023
  8,390
  8,777
  9,183
  9,611
  10,061
  10,535
Change in working capital, $m
  24
  -32
  -38
  -43
  -48
  -53
  -59
  -64
  -69
  -74
  -80
  -85
  -91
  -97
  -103
  -109
  -116
  -123
  -130
  -137
  -145
  -153
  -161
  -170
  -179
  -188
  -198
  -209
  -220
  -231
  -243
Cash from operations, $m
  4,032
  3,395
  4,123
  4,213
  4,313
  4,423
  4,543
  4,673
  4,813
  4,964
  5,126
  4,770
  4,953
  5,148
  5,355
  5,575
  5,808
  6,053
  6,313
  6,588
  6,878
  7,183
  7,505
  7,845
  8,202
  8,579
  8,975
  9,392
  9,831
  10,292
  10,778
Maintenance CAPEX, $m
  0
  -750
  -764
  -782
  -802
  -825
  -850
  -877
  -907
  -939
  -974
  -1,011
  -1,051
  -1,094
  -1,140
  -1,188
  -1,239
  -1,293
  -1,351
  -1,412
  -1,476
  -1,544
  -1,615
  -1,691
  -1,770
  -1,854
  -1,942
  -2,035
  -2,133
  -2,236
  -2,344
New CAPEX, $m
  -1,223
  -223
  -269
  -307
  -345
  -382
  -420
  -457
  -495
  -533
  -572
  -612
  -653
  -695
  -739
  -784
  -831
  -879
  -930
  -983
  -1,038
  -1,095
  -1,155
  -1,217
  -1,282
  -1,350
  -1,422
  -1,497
  -1,575
  -1,657
  -1,743
Cash from investing activities, $m
  2,953
  -973
  -1,033
  -1,089
  -1,147
  -1,207
  -1,270
  -1,334
  -1,402
  -1,472
  -1,546
  -1,623
  -1,704
  -1,789
  -1,879
  -1,972
  -2,070
  -2,172
  -2,281
  -2,395
  -2,514
  -2,639
  -2,770
  -2,908
  -3,052
  -3,204
  -3,364
  -3,532
  -3,708
  -3,893
  -4,087
Free cash flow, $m
  6,985
  2,422
  3,089
  3,123
  3,166
  3,216
  3,274
  3,339
  3,412
  3,492
  3,580
  3,146
  3,249
  3,359
  3,477
  3,603
  3,738
  3,881
  4,033
  4,194
  4,364
  4,545
  4,736
  4,937
  5,150
  5,374
  5,611
  5,860
  6,123
  6,400
  6,691
Issuance/(repayment) of debt, $m
  -1,409
  393
  441
  504
  566
  627
  688
  749
  811
  874
  938
  1,003
  1,070
  1,140
  1,211
  1,285
  1,362
  1,442
  1,525
  1,611
  1,701
  1,795
  1,893
  1,995
  2,102
  2,214
  2,331
  2,454
  2,582
  2,716
  2,857
Issuance/(repurchase) of shares, $m
  -2,260
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -3,688
  393
  441
  504
  566
  627
  688
  749
  811
  874
  938
  1,003
  1,070
  1,140
  1,211
  1,285
  1,362
  1,442
  1,525
  1,611
  1,701
  1,795
  1,893
  1,995
  2,102
  2,214
  2,331
  2,454
  2,582
  2,716
  2,857
Total cash flow (excl. dividends), $m
  3,279
  2,815
  3,530
  3,628
  3,732
  3,843
  3,962
  4,088
  4,223
  4,366
  4,517
  4,149
  4,319
  4,499
  4,688
  4,888
  5,100
  5,322
  5,557
  5,805
  6,065
  6,340
  6,628
  6,932
  7,252
  7,588
  7,942
  8,314
  8,705
  9,116
  9,548
Retained Cash Flow (-), $m
  -216
  -318
  -365
  -417
  -469
  -519
  -570
  -620
  -672
  -724
  -777
  -831
  -886
  -944
  -1,003
  -1,064
  -1,128
  -1,194
  -1,263
  -1,334
  -1,409
  -1,486
  -1,568
  -1,652
  -1,741
  -1,834
  -1,931
  -2,032
  -2,138
  -2,250
  -2,366
Prev. year cash balance distribution, $m
 
  1,697
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  4,194
  3,165
  3,210
  3,263
  3,324
  3,392
  3,468
  3,551
  3,642
  3,741
  3,319
  3,433
  3,555
  3,685
  3,824
  3,972
  4,128
  4,295
  4,471
  4,657
  4,853
  5,061
  5,280
  5,511
  5,755
  6,012
  6,282
  6,567
  6,866
  7,182
Discount rate, %
 
  4.40
  4.62
  4.85
  5.09
  5.35
  5.62
  5.90
  6.19
  6.50
  6.83
  7.17
  7.53
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
PV of cash for distribution, $m
 
  4,017
  2,892
  2,785
  2,675
  2,561
  2,444
  2,322
  2,196
  2,066
  1,933
  1,550
  1,437
  1,323
  1,207
  1,092
  979
  868
  762
  660
  565
  478
  398
  326
  263
  209
  162
  124
  93
  68
  49
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Thomson Reuters Corporation provides news and information for professional markets worldwide. The company sells electronic content and services to professionals primarily on a subscription basis. It operates through three business units: Financial & Risk, Legal, and Tax & Accounting. The Financial & Risk business unit offers news, information and analytics, enabling transactions and connecting communities of trading, investment, financial, and corporate professionals, as well as regulatory and operational risk management solutions. The Legal business unit provides critical online and print information, decision tools, and software and services to support legal, investigation, business, and government professionals. The Tax & Accounting business unit offers integrated tax compliance and accounting information, software, and services for professionals in accounting firms, corporations, law firms, and government. The company also provides intellectual property and scientific information, and decision support tools and services that enable governments, academia, publishers, corporations, and law firms to discover, protect, and commercialize new ideas and brands. In addition, it operates Reuters, which provides real-time multimedia news and information services to newspapers, television and cable networks, radio stations, and Websites. The company was formerly known as The Thomson Corporation and changed its name to Thomson Reuters Corporation in April 2008. Thomson Reuters Corporation was founded in 1799 and is headquartered in New York, New York.

FINANCIAL RATIOS  of  Thomson Reuters Corporation (TRI)

Valuation Ratios
P/E Ratio 10.2
Price to Sales 2.8
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 10.6
Price to Free Cash Flow 15.3
Growth Rates
Sales Growth Rate -0.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -4.8%
Cap. Spend. - 3 Yr. Gr. Rate -2%
Financial Strength
Quick Ratio 2
Current Ratio 0.1
LT Debt to Equity 49.2%
Total Debt to Equity 58.4%
Interest Coverage 4
Management Effectiveness
Return On Assets 12.1%
Ret/ On Assets - 3 Yr. Avg. 8.3%
Return On Total Capital 14.9%
Ret/ On T. Cap. - 3 Yr. Avg. 9.6%
Return On Equity 24.4%
Return On Equity - 3 Yr. Avg. 15.5%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 92.5%
Gross Margin - 3 Yr. Avg. 92.2%
EBITDA Margin 26.3%
EBITDA Margin - 3 Yr. Avg. 29.1%
Operating Margin 12.4%
Oper. Margin - 3 Yr. Avg. 15.3%
Pre-Tax Margin 9.3%
Pre-Tax Margin - 3 Yr. Avg. 11.8%
Net Profit Margin 27.7%
Net Profit Margin - 3 Yr. Avg. 18%
Effective Tax Rate -1.4%
Eff/ Tax Rate - 3 Yr. Avg. 1.5%
Payout Ratio 31.7%

TRI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TRI stock intrinsic value calculation we used $15086 million for the last fiscal year's total revenue generated by Thomson Reuters Corporation. The default revenue input number comes from 2016 income statement of Thomson Reuters Corporation. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our TRI stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.4%, whose default value for TRI is calculated based on our internal credit rating of Thomson Reuters Corporation, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Thomson Reuters Corporation.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of TRI stock the variable cost ratio is equal to 86.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for TRI stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.3% for Thomson Reuters Corporation.

Corporate tax rate of 27% is the nominal tax rate for Thomson Reuters Corporation. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the TRI stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for TRI are equal to 76%.

Life of production assets of 15.3 years is the average useful life of capital assets used in Thomson Reuters Corporation operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for TRI is equal to -10.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $17257 million for Thomson Reuters Corporation - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 722.017 million for Thomson Reuters Corporation is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Thomson Reuters Corporation at the current share price and the inputted number of shares is $42.5 billion.


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