Pearson (PSO) AI Stock Analysis

• Market Cap: $8.19B
• Dividend Yield: 2.11%
• Average Volume (3M): 1.21M
• Price to Earnings (P/E): 20.7
• Beta (1Y): 0.24
• Revenue Growth: 1.93%
• EPS Growth: 34.40%
• Country: US
• Employees: 17,116
• Sector: Communication Services
• Sector Strength: 97
• Industry: Publishing
• EPS (TTM): 0.53
• Shares Outstanding: 628,294,900
• 10 Day Avg. Volume: 1,106,041
• 30 Day Avg. Volume: 1,206,774
• PEG Ratio: -1.00
• Price to Book (P/B): 1.86
• Price to Sales (P/S): 1.94
• P/FCF Ratio: 10.50
• Enterprise Value/Market Cap: 0.95
• Enterprise Value/Revenue: 2.19
• Enterprise Value/Gross Profit: 4.21
• Enterprise Value/Ebitda: 8.60
• 1Y Price Target: $13.90
• Price Target Upside: 6.60% Upside
• Rating Consensus: Hold
• Number of Analyst Covering: 1
• EPS Forecast (FY): 0.93
• Revenue Forecast (FY): $5.01B

• Rating: 64 Neutral
• Price Target: $14.00 ▲(7.36% Upside)
• Action: Reiterated Date: 03/02/26
• Date: Action: Reiterated 03/02/26

The score is driven primarily by solid financial quality (strong margins and improving free cash flow) and supportive earnings-call outlook (mid-single-digit growth guidance, margin progress, and continued strong cash conversion). These positives are tempered by weak multi-year reported revenue trends, rising leverage, and a mixed technical picture with negative MACD and longer-term price weakness.

Positive Factors

High Profitability and Margins

Sustained high gross and EBITDA margins provide structural resilience: they support reinvestment in product development, fund buybacks/dividends and buffer top-line volatility. Durable margins also enable competitive pricing flexibility and stronger cash generation over multi-year horizons.

Strong Free Cash Flow Conversion

Very high free cash conversion and improving FCF support capital allocation optionality: funding buybacks, strategic tech investment and debt reduction without relying on equity issuance. Robust FCF over multiple years underpins durable shareholder returns and financial flexibility.

Enterprise Partnerships & Backlog

Long-term partnerships with major tech and services firms create a multi-year revenue backlog and distribution scale. These agreements diversify revenue, increase enterprise deal stickiness and support recurring contracts, strengthening Pearson's structural revenue base through 2030.

Negative Factors

Multi-year Revenue Decline

A three-year top-line decline is a structural concern: persistent revenue contraction limits operating leverage and makes margin gains harder to sustain. Reversing this trend requires consistent execution on product adoption and enterprise deal conversion to restore multi-year growth trajectory.

Rising Net Debt and Interest Costs

Higher net debt and elevated interest expense reduce balance-sheet flexibility and raise refinancing sensitivity. With buybacks and investment underway, leverage drift can constrain future M&A, capex or cushion against cyclical downturns, making capital allocation more trade-off driven over the medium term.

Execution & Recognition Risks

Platform consolidation, a material impairment and lost contracts expose execution risk and operational complexity. Legacy platform work and timing/recognition uncertainty for large enterprise deals can delay revenue realization and raise implementation costs, pressuring near- and medium-term growth realization.

Pearson Business Overview & Revenue Model

Company Description

Pearson plc provides educational courseware, assessments, and services in the United Kingdom, the United States, Canada, the Asia Pacific, other European countries, and internationally. It operates through five segments: Assessment & Qualifications, Virtual Learning, English Language Learning, Higher Education, and Workforce Skills. The Assessment & Qualifications segment offers Pearson VUE, US student assessment, clinical assessment, UK GCSE, and A levels and international academic qualifications. The Virtual Learning segment provides virtual schools and online program management services. The English Language Learning segment offers Pearson test of English, institutional courseware, and English online solutions. The Higher Education segment provides the US, Canadian, and international higher education courseware businesses. The Workforce Skills offers BTEC, GED, TalentLens, Faethm, Pearson college, and apprenticeships. Pearson plc was founded in 1844 and is headquartered in London, the United Kingdom.

How the Company Makes Money

Pearson generates revenue through multiple streams, primarily from the sale of educational materials and services. Key revenue sources include the sale of print and digital textbooks, e-learning platforms, and subscription-based services for online courses. Additionally, Pearson earns revenue from assessment and testing services, which are utilized by educational institutions and governments. The company has established significant partnerships with universities, colleges, and other educational organizations, allowing it to expand its reach and enhance its offerings. Furthermore, Pearson's investments in technology and digital learning solutions position it to capitalize on the growing trend of online education, contributing to its overall earnings.

Pearson Financial Statement Overview

Summary

Strong profitability profile and improving free cash flow support quality (gross margin ~52% and FCF ~96% of net income in 2025). Offsetting this, revenue declined across 2023–2025, net margin compressed in 2025, and leverage rose versus prior years, which reduces flexibility.

Income Statement

Profitability is solid with gross margin around 52% in 2025 and healthy operating profitability (about 14% operating margin; ~30% EBITDA margin). However, revenue growth is a clear weak spot: revenue declined in each of the last three annual periods (2023–2025), and net margin fell from ~12% in 2024 to ~9% in 2025. Overall, strong margins but a softer top-line trend and some recent profit compression.

Balance Sheet

Leverage remains manageable with debt at ~0.52x equity in 2025, but it has risen versus 2023–2024, reducing balance-sheet flexibility. Shareholders’ equity is sizable, and returns on equity are reasonable (~9% in 2025), though down from 2024 (~11%). Net, the balance sheet looks stable, but the direction of leverage is a key watch item.

Cash Flow

Cash generation is a strength: free cash flow is high relative to earnings (about 96% of net income in 2025), supporting earnings quality. Free cash flow also improved meaningfully in 2025 versus 2024. The main concern is that operating cash flow is not consistently strong relative to profitability (coverage below 1.0 across the period), but overall cash conversion and free cash flow momentum are favorable.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	3.50B	3.55B	3.67B	3.84B	3.43B
Gross Profit	1.82B	1.81B	1.83B	1.79B	1.68B
EBITDA	1.06B	1.11B	1.10B	930.00M	751.00M
Net Income	327.66M	434.00M	378.00M	242.00M	177.00M
Balance Sheet
Total Assets	6.45B	6.89B	6.73B	7.31B	7.34B
Cash, Cash Equivalents and Short-Term Investments	332.41M	543.00M	312.00M	558.00M	937.00M
Total Debt	1.89B	1.47B	1.16B	1.24B	1.40B
Total Liabilities	2.79B	2.84B	2.74B	2.91B	3.06B
Stockholders Equity	3.64B	4.04B	3.97B	4.40B	4.27B
Cash Flow
Free Cash Flow	646.51M	503.00M	399.00M	304.00M	150.00M
Operating Cash Flow	674.88M	627.00M	525.00M	361.00M	326.00M
Investing Cash Flow	-270.93M	-131.00M	-301.00M	13.00M	-80.00M
Financing Cash Flow	-595.65M	-241.00M	-450.00M	-804.00M	-414.00M

Pearson Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 13.04
• 50DMA: Positive
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: 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 13.04 is above the 20-day moving average (MA) of 12.86, above the 50-day MA of 13.01, and below the 200-day MA of 13.91, indicating a neutral trend. The MACD of 0.08 indicates Negative momentum. The RSI at 54.73 is Neutral, neither overbought nor oversold. The STOCH value of 60.67 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for PSO.

Pearson Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
NYT	80 Outperform	$12.79B	32.93	17.55%	0.95%	8.43%	21.38%
WLY	70 Outperform	$1.88B	13.74	20.75%	4.48%	-5.33%	―
SCHL	65 Neutral	$859.93M	3.37	-0.37%	2.78%	2.53%	-23.86%
PSO	64 Neutral	$8.19B	20.71	8.86%	2.11%	1.93%	34.40%
Sector *	60 Neutral	$48.67B	4.58	-11.27%	4.14%	2.83%	-41.78%
EDUC	53 Neutral	$11.51M	0.35	9.96%	―	-30.65%	-62.03%

Pearson Corporate Events

Cevian Capital Lifts Pearson Stake Above 15% in January 2026

On 14 January 2026, activist investor Cevian Capital II GP Limited increased its stake in Pearson plc, crossing a UK disclosure threshold as its indirect voting interest rose from 14.17% to 15.26%, equivalent to 97,043,459 voting rights, with the holding legally registered under Aurora Nominees Limited on behalf of UBS AG as custodian. The move, formally notified to Pearson on 16 January 2026 and completed in Jersey, further consolidates Cevian’s position as a major shareholder in the education group, potentially giving it greater influence over corporate governance, strategy and capital allocation, and underscoring continued investor scrutiny of Pearson’s performance and transformation efforts.

The most recent analyst rating on (PSO) stock is a Buy with a $14.00 price target. To see the full list of analyst forecasts on Pearson stock, see the PSO Stock Forecast page.

Pearson Updates Block Listing for Employee Share Schemes

On 16 January 2026, Pearson plc filed a block listing return covering activity between 1 December 2025 and 15 January 2026 for two of its employee share schemes, providing an update on the use of previously authorised share capital. Under its Save for Shares Plan, the company allotted 41,942 shares during the period, reducing the balance of unallotted securities under that scheme from 1,482,109 to 1,440,167, while no shares were issued under the Employee Stock Purchase Plan, leaving its unallotted balance unchanged at 2,228,992 shares. The disclosures indicate modest utilisation of shares for employee incentives without any increase in the size of the underlying block listings, suggesting Pearson is continuing to support staff participation in equity schemes within existing shareholder authorisations rather than expanding its potential dilution.

The most recent analyst rating on (PSO) stock is a Hold with a $15.50 price target. To see the full list of analyst forecasts on Pearson stock, see the PSO Stock Forecast page.