Pearson (PSO) AI Stock Analysis

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Pearson

(NYSE:PSO)

71Outperform

Pearson is performing well financially with robust cash flow and profitability, offsetting inconsistent revenue growth. Technical indicators suggest caution due to bearish trends, but the company's fair valuation and positive earnings call sentiment highlight strategic growth and shareholder returns. Key risks include challenges in Virtual Learning and potential geopolitical impacts.

Pearson (PSO) vs. S&P 500 (SPY)

Market Cap

$9.98B

Dividend Yield1.94%

Average Volume (3M)940.83K

Price to Earnings (P/E)19.0

Beta (1Y)0.43

Revenue Growth-0.59%

EPS Growth24.06%

CountryUS

Employees17,116

SectorCommunication Services

Sector Strength79

IndustryPublishing

Share Statistics

EPS (TTM)0.46

Shares Outstanding664,168,300

10 Day Avg. Volume1,534,245

30 Day Avg. Volume940,829

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)2.21

Price to Cash Flow (P/CF)52.30

P/FCF Ratio66.20

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$17.00

Price Target Upside7.12% Upside

Rating ConsensusHold

Number of Analyst Covering1

Pearson Business Overview & Revenue Model

Company DescriptionPearson plc, operating under the ticker PSO, is a global education company headquartered in London, United Kingdom. It operates through three core business segments: Global Online Learning, Global Assessment, and Global Qualifications. Pearson provides a wide range of educational products and services, including digital learning tools, courseware, assessment services, and qualifications for schools, higher education institutions, and professional certification bodies worldwide. The company is committed to helping people make progress in their lives through learning, leveraging technology to enhance educational outcomes.

How the Company Makes MoneyPearson makes money through a diversified revenue model centered on its three main business segments. The Global Online Learning segment generates revenue by offering digital education platforms and online program management for universities and other educational institutions. The Global Assessment segment earns through the provision of testing and assessment services, including standardized tests and professional certifications, which are utilized by educational institutions and employers worldwide. The Global Qualifications segment derives revenue from providing curriculum and qualifications, such as BTEC and Edexcel qualifications, which are recognized and used in over 70 countries. Additionally, Pearson forms strategic partnerships with educational institutions and governments, which further support its revenue streams by expanding its reach and influence in the global education sector.

Pearson Financial Statement Overview

Summary

Pearson's financial health is marked by consistent profitability, a strong balance sheet, and impressive cash flow management. Despite some fluctuations in revenue growth, the company demonstrates robust operational efficiency and a solid capital structure, positioning it well within the traditional media industry.

Income Statement

Positive

Pearson exhibits moderate profitability with a consistent gross profit margin around 51% over recent years, indicating stable cost management. The net profit margin improved from 9.7% in 2020 to 12.2% in 2024, showcasing enhanced efficiency. However, revenue growth has been inconsistent, with a 5% decline in 2024 compared to 2023. EBIT and EBITDA margins have shown resilience, reflecting operational strength.

Balance Sheet

Positive

The balance sheet reveals a steady financial position with a debt-to-equity ratio of approximately 0.36, indicating manageable leverage. ROE improved from 5.8% in 2020 to 10.7% in 2024, driven by increased profitability. The equity ratio remains strong at 58.6%, reflecting a solid capital structure. However, the slight decline in total assets and stockholders' equity warrants attention.

Cash Flow

Very Positive

Pearson demonstrates robust cash flow management, with a significant increase in free cash flow from $255M in 2020 to $503M in 2024, reflecting effective cost control and investment strategies. The operating cash flow to net income ratio shows strong conversion, with a ratio of 1.44 in 2024, indicating healthy cash generation relative to earnings.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
3.55B	3.55B	3.67B	3.84B	3.43B	3.40B
	Gross Profit
1.79B	1.81B	1.83B	1.79B	1.68B	1.63B
	EBIT
501.00M	541.00M	498.00M	271.00M	183.00M	283.00M
	EBITDA
872.00M	1.11B	1.10B	930.00M	751.00M	1.01B
	Net Income Common Stockholders
349.00M	434.00M	378.00M	242.00M	177.00M	330.00M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
1.75B	543.00M	312.00M	543.00M	937.00M	1.10B
	Total Assets
10.67B	6.89B	6.73B	7.31B	7.34B	7.45B
	Total Debt
2.31B	1.47B	1.16B	1.22B	1.40B	1.65B
	Net Debt
576.00M	929.00M	849.00M	672.00M	463.00M	554.00M
	Total Liabilities
5.06B	2.84B	2.74B	2.89B	3.06B	3.32B
	Stockholders Equity
5.54B	4.04B	3.97B	4.40B	4.27B	4.13B
Cash Flow		Free Cash Flow
516.00M	503.00M	399.00M	304.00M	150.00M	255.00M
	Operating Cash Flow
897.00M	627.00M	525.00M	361.00M	326.00M	389.00M
	Investing Cash Flow
-448.00M	-131.00M	-301.00M	13.00M	-80.00M	591.00M
	Financing Cash Flow
-463.00M	-241.00M	-450.00M	-804.00M	-414.00M	-299.00M

Pearson Technical Analysis

Technical Analysis Sentiment

Positive

Last Price15.87

Price Trends

50DMA

16.27

Negative

100DMA

15.97

Negative

200DMA

14.70

Positive

Market Momentum

MACD

-0.21

Negative

RSI

48.40

Neutral

STOCH

63.74

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PSO, the sentiment is Positive. The current price of 15.87 is above the 20-day moving average (MA) of 15.76, below the 50-day MA of 16.27, and above the 200-day MA of 14.70, indicating a neutral trend. The MACD of -0.21 indicates Negative momentum. The RSI at 48.40 is Neutral, neither overbought nor oversold. The STOCH value of 63.74 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for PSO.

Pearson Risk Analysis

Pearson disclosed 29 risk factors in its most recent earnings report. Pearson reported the most risks in the “Tech & Innovation” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Pearson Peers Comparison

Overall Rating

UnderperformOutperform

Sector (58)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
RELX	79 Outperform	$91.82B	37.84	56.34%	1.57%	5.86%	13.13%
PSO	71 Outperform	$9.98B	18.97	10.99%	1.94%	-0.59%	24.06%
NYT	69 Neutral	$7.93B	27.36	15.92%	1.07%	6.59%	26.68%
NWSA	65 Neutral	$15.70B	36.25	5.23%	0.76%	-1.51%	82.74%
SCHL	65 Neutral	$429.20M	26.99	1.92%	4.97%	-3.10%	-58.47%
Sector *	58 Neutral	$26.42B	2.90	-10.89%	4.33%	2.18%	-46.94%
WLY	58 Neutral	$2.31B	57.71	5.77%	3.29%	-11.77%	―

* Communication Services Sector Average

Performance Comparison

PSO

Pearson

15.87

3.84

31.92%

WLY

John Wiley Sons Cl A

42.79

6.99

19.53%

NYT

New York Times

48.76

7.03

16.85%

NWSA

News Corp

26.38

2.46

10.28%

SCHL

Scholastic

16.10

-18.03

-52.83%

RELX

Relx

51.51

10.96

27.03%

Pearson Earnings Call Summary

Earnings Call Date: Feb 28, 2025 | % Change Since: -4.63% | Next Earnings Date: Aug 4, 2025

Earnings Call Sentiment Positive

The earnings call highlighted strong financial performance, successful contract renewals, and strategic partnerships that leverage AI for growth. However, there were challenges in the Virtual Learning segment and anticipated market headwinds in English Language Learning due to geopolitical factors. Overall, the company maintained a positive outlook for future growth.

Highlights

Strong Financial Performance

Sales grew by 3% and profits by 10% with an EBIT margin of 16.9% and strong free cash flow generation. Adjusted EPS increased by 7% to 62.1p.

Successful Contract Renewals

Pearson VUE achieved a customer retention rate of 99% and successfully renewed key contracts in U.S. student assessments.

Partnerships and Technological Advancements

New partnerships with AWS and Microsoft, focusing on leveraging AI and expanding enterprise learning solutions.

Enterprise Learning and Skills Growth

Workforce Skills division turned profitable and is set to grow high single digits with new contracts with ServiceNow, Microsoft, and AWS.

Dividend and Share Buyback

Increased dividend by 6% and announced a £350 million share buyback due to strong free cash flow.

Lowlights

Virtual Learning Decline

Virtual Learning declined by 4% due to the final portion of OPM ASU in the first half comparison.

English Language Learning Challenges

Anticipated market challenges due to election impacts on immigration rates in 2025.

Company Guidance

During Pearson's 2024 Full-Year Results call, the company announced solid financial performance, meeting market expectations with a 3% sales growth and a substantial 10% increase in profits, resulting in an EBIT margin of 16.9%. The firm highlighted a strong free cash flow conversion of 117% and an adjusted EPS increase of 7% to 62.1p. Looking forward to 2025, Pearson expects each business unit to contribute to growth, with a focus on expanding its enterprise learning and skills segment, and maintaining a mid-single-digit CAGR in sales. The company also announced a £350 million share buyback, reflecting its financial confidence and commitment to shareholder returns.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.