During the September 28 episode of Mad Money, a caller asked whether Thomson Reuters Corporation (NASDAQ:TRI) is undervalued following its recent selloff, highlighting its strong moat and trusted information used by regulated industries. Jim Cramer replied:
I think that’s true. But what has happened is everything that is possibly considered to be replaced by AI has to have its multiple shrink, and this stock still sells at 28 times earnings. Until that multiple comes down and that yield goes up, of course, this is what happens when a stock declines, it’s not a bargain… It’s just not a bargain.
In August, Cramer flagged Thomson Reuters Corporation as a value trap.
Trusted Professional Moat And Strong Organic Revenue Streams
The operational foundation supporting Thomson Reuters Corporation remains remarkably durable across its core divisions. During the second quarter, the company posted total revenues of $1.95 billion, marking a 9% increase on a constant currency basis and an 8% rise in organic growth. The primary growth engines, including the legal, corporate, and tax and audit professional segments, accelerated with a 10% organic revenue increase, forming 83% of aggregate enterprise revenues. Recurring revenues climbed 9% to represent 82% of total company revenues. In Legal Professionals, recurring revenues rose 9% and represented 97% of segment revenue, with organic growth driven primarily by Westlaw and CoCounsel.. These metrics highlight that professional clients continue to depend heavily on proprietary databases and specialized compliance workflows, validating the intrinsic quality of the franchise.
Elevated Valuation Multiples And AI Sentiment Pressures
Market sentiment remains constrained by broader fears regarding AI displacement. Information monopolies that previously enjoyed permanent valuation premiums are now subjected to intense scrutiny by investors who fear that automated legal reasoning and tax synthesis tools could erode pricing power over time. Even though Thomson Reuters Corporation’s share price experienced a 25% decline year-to-date as part of a broader sectoral cooling period, Cramer highlighted that its earnings multiple shows priced-in optimism. As he mentioned, until valuation multiples compress further to provide an adequate margin of safety and a higher dividend yield, investors lack sufficient incentive to treat the equity as a compelling bargain.
Institutional Sponsorship And Short Interest Market Dynamics
According to Insider Monkey database metrics tracking institutional portfolios, 16 hedge funds held positions in Thomson Reuters Corporation at the close of the second quarter, decreasing from 26 funds in the prior quarter as some professional managers trimmed exposure. During the quarter, AQR Capital Management had 712,176 shares and was the largest shareholder among hedge funds tracked by Insider Monkey. Moreover, Arrowstreet Capital and Heathbridge Capital Management also initiated significant positions in the stock with 619,352 shares and 190,743 shares, respectively.
The short seller activity remains subject to structural context, with short interest floating between 2.92% and 9.43% depending on how calculations treat massive insider holdings and controlling blocks, notably the substantial stake held by Woodbridge. As institutional investors balance strong recurring cash flows against technological disruption headwinds, the stock continues to trade in a consolidation range while waiting for valuation alignment.
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