LegalZoom.com (NASDAQ:LZ) versus Thomson Reuters (NASDAQ:TRI) Critical Analysis

Thomson Reuters (NASDAQ:TRI) and LegalZoom.com (NASDAQ:LZ) are both industrials companies, but which is the better stock? We will compare the two companies based on the strength of their earnings, risk, institutional ownership, profitability, dividends, analyst recommendations and valuation.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Thomson Reuters and LegalZoom.com, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Thomson Reuters	0	6	10	1	2.71
LegalZoom.com	2	6	0	0	1.75

Thomson Reuters currently has a consensus price target of $130.97, suggesting a potential upside of 21.05%. LegalZoom.com has a consensus price target of $7.30, suggesting a potential upside of 16.09%. Given Thomson Reuters’ stronger consensus rating and higher probable upside, research analysts plainly believe Thomson Reuters is more favorable than LegalZoom.com.

Volatility & Risk

Thomson Reuters has a beta of 0.75, suggesting that its stock price is 25% less volatile than the S&P 500. Comparatively, LegalZoom.com has a beta of 1.2, suggesting that its stock price is 20% more volatile than the S&P 500.

Earnings & Valuation

This table compares Thomson Reuters and LegalZoom.com”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Thomson Reuters	$7.83 billion	5.99	$1.50 billion	$3.76	28.78
LegalZoom.com	$792.49 million	1.36	$15.43 million	$0.09	69.87

Thomson Reuters has higher revenue and earnings than LegalZoom.com. Thomson Reuters is trading at a lower price-to-earnings ratio than LegalZoom.com, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

17.3% of Thomson Reuters shares are owned by institutional investors. Comparatively, 82.0% of LegalZoom.com shares are owned by institutional investors. 7.4% of LegalZoom.com shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Dividends

Thomson Reuters pays an annual dividend of $2.62 per share and has a dividend yield of 2.4%. LegalZoom.com pays an annual dividend of $1.44 per share and has a dividend yield of 22.9%. Thomson Reuters pays out 69.7% of its earnings in the form of a dividend. LegalZoom.com pays out 1,600.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Profitability

This table compares Thomson Reuters and LegalZoom.com’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Thomson Reuters	21.22%	15.82%	10.27%
LegalZoom.com	2.13%	15.83%	5.08%

Summary

Thomson Reuters beats LegalZoom.com on 11 of the 17 factors compared between the two stocks.

About Thomson Reuters

Thomson Reuters Corporation provides business information services in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. It operates in five segments: Legal Professionals, Corporates, Tax & Accounting Professionals, Reuters News, and Global Print. The Legal Professionals segment offers research and workflow products focusing on legal research and integrated legal workflow solutions that combine content, tools, and analytics to law firms and governments. The Corporates segment provides a suite of content-enabled technology solutions for legal, tax, regulatory, compliance, and IT professionals. The Tax & Accounting Professionals segment offers research and workflow products focusing on tax offerings and automating tax workflows to tax, accounting, and audit professionals in accounting firms. The Reuters News segment provides business, financial, and international news to media organizations, professional, and news consumers through news agency and industry events. The Global Print segment offers legal and tax information primarily in print format to legal and tax professionals, governments, law schools, and corporations. The company was formerly known as The Thomson Corporation and changed its name to Thomson Reuters Corporation in April 2008. The company was founded in 1851 and is headquartered in Toronto, Canada. Thomson Reuters Corporation is a subsidiary of The Woodbridge Company Limited.

About LegalZoom.com

LegalZoom.com, Inc., together with its subsidiaries, operates an online platform that supports the legal, compliance, and business management needs of small businesses and consumers in the United States. The company’s platform offers business formation products, such as limited liability company, incorporation of C and S corporations, nonprofit formations, doing-business-as, corporate changes and filings, business licenses, legal forms, and beneficial ownership information reports; intellectual property products consisting of trademark and patent applications, and copyright registrations; and tax services, including business and personal tax preparations. It also provides consumer, estate planning, and other services comprising last will and testament, living will, living trust, power of attorney, and name change. In addition, the company offers subscriptions services, including registered agent, compliance, attorney advice, tax advice and preparation, eSignature, virtual mail and check deposit services, trademark monitoring, and estate planning bundle. The company was incorporated in 1999 and is headquartered in Mountain View, California.