Pearson (PSO) AI Stock Analysis

• Market Cap: $9.45B
• Dividend Yield: 2.87%
• Average Volume (3M): 619.64K
• Price to Earnings (P/E): 17.7
• Beta (1Y): 0.33
• Revenue Growth: -0.59%
• EPS Growth: 24.06%
• Country: US
• Employees: 17,116
• Sector: Communication Services
• Sector Strength: 79
• Industry: Publishing
• EPS (TTM): 0.46
• Shares Outstanding: 655,959,400
• 10 Day Avg. Volume: 736,695
• 30 Day Avg. Volume: 619,636
• PEG Ratio: 0.65
• Price to Book (P/B): 1.56
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 22.62
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $17.00
• Price Target Upside: 16.52% Upside
• Rating Consensus: Hold
• Number of Analyst Covering: 0

• Rating: 72 Outperform
• Price Target: $16.50 ▲(13.09%Upside)

Pearson's overall stock score reflects strong financial performance and a positive earnings call, highlighting growth and strategic initiatives. However, technical analysis suggests bearish momentum, and the valuation indicates limited upside potential. The balance of strengths and challenges positions the stock moderately within the publishing industry.

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 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 shows consistent profitability and operational efficiency with a stable gross profit margin and improved net profit margin. The balance sheet is solid with manageable leverage, while cash flow management is robust, evidenced by a substantial increase in free cash flow. However, the decline in revenue growth and slight decrease in total assets are areas of concern.

Income Statement

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

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

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.

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

Pearson Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 14.59
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Positive
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PSO, the sentiment is Negative. The current price of 14.59 is below the 20-day moving average (MA) of 15.68, below the 50-day MA of 15.72, and below the 200-day MA of 15.30, indicating a bearish trend. The MACD of -0.35 indicates Positive momentum. The RSI at 29.91 is Positive, neither overbought nor oversold. The STOCH value of 9.23 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for PSO.

Pearson Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
NYT	80 Outperform	$9.06B	30.33	16.68%	1.29%	6.85%	21.26%
RELX	77 Outperform	$97.34B	39.83	56.34%	2.10%	5.86%	13.13%
NWSA	73 Outperform	$16.42B	32.12	5.88%	0.73%	-5.43%	135.46%
PSO	72 Outperform	$9.45B	17.71	10.99%	2.87%	-0.59%	24.06%
SCHL	67 Neutral	$505.98M	31.26	1.92%	4.29%	-3.10%	-58.47%
Sector *	61 Neutral	$14.64B	5.81	-3.99%	6.03%	2.71%	-31.56%
WLY	46 Neutral	$2.08B	50.84	5.77%	3.74%	-11.77%	―