First came the strong pound. Then the Far Eastern economies faltered. To top it all, Reuters was hit by allegations of stealing information from arch-rival Bloomberg. The result is that Reuters shares, which closed up 10.5p at 572p yesterday, have lost almost a third of their value in the past 18 months.
On fundamentals, this fall looks wildly overdone. Although pre-tax profits for the year to last December fell by 4 per cent to pounds 626m on turnover down 1 per cent to pounds 2.88bn, this is largely down to currencies and a number of other one-off items.
Strip out the effects of sterling - which reduced the value of Reuters' overseas earnings - and revenues rose by 9 per cent while profits were up 11 per cent. Ignore the cost of preparing terminals for the millennium date change and the switch to EMU, not to mention Reuters' adoption of the new accounting standard, and profits look even better.
The real cloud over the shares, however, is the US inquiry. Although Reuters tried to calm the markets with a statement last week, investors remain largely in the dark about the extent of the investigation, and its possible implications. As a result, they are assuming the worst. And until the uncertainty lifts in a few months' time, Reuters shares look like dead money.
All the same, there is value to be had. For the coming year, brokers are pencilling in flat profits, placing the shares on a forward p/e ratio, ignoring accounting changes, of 20, which looks cheap compared to the highly rated media sector.
Then there is the prospect of sharing in the pounds 1.5bn the group is planning to hand back to shareholders in a few weeks' time. The Bloomberg enquiry remains a worry, but it's hard to see the shares falling much further. Good value.Reuse content