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Pearson Plc (PSO)
NYSE:PSO
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Pearson
(NYSE:PSO)
71Outperform
Pearson (PSO) vs. S&P 500 (SPY)
Market Cap
$10.77B
Dividend Yield1.79%
Average Volume (3M)450.41K
Price to Earnings (P/E)20.0
Beta (1Y)0.50
Revenue Growth-5.51%
EPS Growth27.79%
CountryUS
Employees18,360
SectorCommunication Services
Sector Strength82
IndustryTraditional Media
Share Statistics
EPS (TTM)0.83
Shares Outstanding666,575,200
10 Day Avg. Volume666,543
30 Day Avg. Volume450,410
Financial Highlights & Ratios
PEG Ratio0.84
Price to Book (P/B)N/A
Price to Sales (P/S)2.37
Price to Cash Flow (P/CF)56.00
P/FCF Ratio70.90
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$17.00Price Target Upside2.47% Upside
Rating ConsensusHold
Number of Analyst Covering1
Pearson Business Overview & Revenue Model
Company DescriptionPearson plc (PSO) is a leading global learning company specializing in educational materials and services. With a strong presence in the education sector, Pearson offers a wide range of products, including textbooks, digital learning tools, assessments, and professional certifications. The company serves various educational institutions, governments, and individual learners, providing innovative solutions that support teaching and learning across the world.
How the Company Makes MoneyPearson generates revenue through multiple streams, primarily focused on education services and products. The company's primary revenue comes from the sale of educational materials, including textbooks and digital content, to schools, colleges, and universities. Additionally, Pearson offers a range of online learning platforms and services, such as MyLab and Mastering, which provide subscription-based access to course content and assessments. The company also earns income through professional certification programs and testing services, which cater to individuals seeking career advancement. Partnerships with educational institutions and government bodies further bolster Pearson's earnings by enabling the distribution of customized learning solutions. Key factors contributing to Pearson's revenue include the growing demand for digital education products and the global emphasis on lifelong learning and skill development.
Pearson Financial Statement Overview
Summary
Pearson exhibits a stable financial performance across its income statement, balance sheet, and cash flow statement. Profitability and cash generation are strong, but a slight revenue decline warrants attention. The company maintains a healthy balance sheet with moderate leverage, providing a stable foundation for future growth.Income Statement
Pearson's income statement shows a mixed performance. The gross profit margin is strong at approximately 49.9%, indicating good control over production costs. The net profit margin has improved to around 10.3%, reflecting enhanced profitability. However, the revenue growth rate has been slightly negative over the past year, which could signal a potential slowdown in sales. The EBIT margin is healthy at 13.6%, and the EBITDA margin stands at a robust 29.9%, showcasing efficient operations.72
Positive
Balance Sheet
Pearson maintains a solid balance sheet with an equity ratio of about 59.1%, highlighting financial stability. The debt-to-equity ratio is reasonable at 0.29, indicating a manageable level of debt. Return on equity is decent at 9.5%, but there's room for improvement to enhance shareholder returns. The company's leverage and equity levels suggest a balanced financial approach with room for strategic investments.68
Positive
Cash Flow
Pearson's cash flow statement reveals a positive trajectory with a 86.4% growth in free cash flow, which is a promising sign of improving cash generation capabilities. The operating cash flow to net income ratio stands at 1.39, indicating strong cash conversion from earnings. The free cash flow to net income ratio is 1.06, showing that the company efficiently translates profits into cash flows.70
Positive
| Breakdown | |||||
| TTM | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 | Dec 2019 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 4.45B | 3.67B | 3.84B | 3.43B | 3.40B | 3.87B | Gross Profit |
| 2.25B | 1.83B | 1.79B | 1.68B | 1.63B | 2.01B | EBIT |
| 658.50M | 498.00M | 271.00M | 183.00M | 283.00M | 275.00M | EBITDA |
| 1.05B | 1.10B | 930.00M | 751.00M | 1.01B | 840.00M | Net Income Common Stockholders |
| 445.00M | 378.00M | 242.00M | 177.00M | 330.00M | 264.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 568.00M | 312.00M | 543.00M | 937.00M | 1.10B | 437.00M | Total Assets |
| 7.91B | 6.73B | 7.31B | 7.34B | 7.45B | 7.65B | Total Debt |
| 720.00M | 1.16B | 1.22B | 1.40B | 1.65B | 1.66B | Net Debt |
| 152.00M | 849.00M | 672.00M | 463.00M | 554.00M | 1.23B | Total Liabilities |
| 3.38B | 2.74B | 2.89B | 3.06B | 3.32B | 3.33B | Stockholders Equity |
| 4.52B | 3.97B | 4.40B | 4.27B | 4.13B | 4.31B |
| Cash Flow | Free Cash Flow | ||||
| 765.00M | 399.00M | 214.00M | 150.00M | 255.00M | 176.00M | Operating Cash Flow |
| 1.15B | 525.00M | 361.00M | 326.00M | 389.00M | 369.00M | Investing Cash Flow |
| -476.50M | -301.00M | 13.00M | -80.00M | 591.00M | -325.00M | Financing Cash Flow |
| -712.50M | -450.00M | -804.00M | -414.00M | -299.00M | -102.00M |
Pearson Technical Analysis
Neutral
16.59
Price Trends
16.50
Negative
15.86
Positive
14.46
Positive
Market Momentum
0.02
Positive
44.77
Neutral
13.04
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PSO, the sentiment is Neutral. The current price of 16.59 is below the 20-day moving average (MA) of 16.95, above the 50-day MA of 16.50, and above the 200-day MA of 14.46, indicating a neutral trend. The MACD of 0.02 indicates Positive momentum. The RSI at 44.77 is Neutral, neither overbought nor oversold. The STOCH value of 13.04 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for PSO.
Pearson Risk Analysis
Pearson disclosed 29 risk factors in its most recent earnings report. Pearson reported the most risks in the “Macro & Political” 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 (59)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $87.64B | 35.64 | 56.34% | 1.64% | 5.86% | 13.13% | |
71 Outperform | $10.77B | 19.96 | 10.97% | 1.79% | -5.51% | 27.79% | |
59 Neutral | $587.03M | ― | -0.42% | 3.83% | -3.89% | -106.78% | |
59 Neutral | $29.20B | 0.14 | -12.92% | 4.06% | 2.18% | -51.74% | |
56 Neutral | $2.52B | 62.96 | 5.77% | 3.01% | -11.77% | ― | |
48 Neutral | $483.37M | ― | -11.19% | ― | -5.79% | -10.12% | |
46 Neutral | $10.73M | ― | -12.44% | ― | -35.97% | -2121.45% |
* Communication Services Sector Average
Performance Comparison
PSO
Pearson
16.59
3.80
29.71%
EDUC
Educational Development
1.25
-0.66
-34.55%
WLY
John Wiley Sons Cl A
43.75
7.87
21.93%
SCHL
Scholastic
19.03
-16.41
-46.30%
GCI
Gannett
3.20
1.22
61.62%
RELX
Relx
47.73
5.17
12.15%
Pearson Earnings Call Summary
Earnings Call Date: Feb 28, 2025 | % Change Since: -1.60% | 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.