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Pearson Plc (PSO)
NYSE:PSO
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Pearson
(NYSE:PSO)
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Rating:72Outperform
Price Target:
$16.00
▲(14.37% Upside)
Pearson's overall stock score reflects its strong financial performance and strategic growth initiatives, balanced by mixed technical indicators and valuation. The earnings call provided a positive outlook, though challenges in specific segments remain.
Pearson (PSO) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$8.95B
Dividend Yield2.13%
Average Volume (3M)506.71K
Price to Earnings (P/E)16.2
Beta (1Y)0.21
Revenue Growth1.93%
EPS Growth34.40%
CountryUS
Employees17,116
SectorCommunication Services
Sector Strength97
IndustryPublishing
Share Statistics
EPS (TTM)0.32
Shares Outstanding642,908,800
10 Day Avg. Volume509,085
30 Day Avg. Volume506,714
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)N/A
P/FCF RatioN/A
Enterprise Value/Market Cap1.30
Enterprise Value/Revenue3.27
Enterprise Value/Gross Profit6.40
Enterprise Value/Ebitda10.40
Forecast
1Y Price Target
$16.00Price Target Upside14.37% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering2
Pearson Business Overview & Revenue Model
Company DescriptionPearson 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 MoneyPearson generates revenue through multiple streams, including the sale of educational materials such as textbooks and digital resources, subscription services for its online learning platforms, and fees for assessments and certifications. A significant portion of its income comes from licensing educational content to institutions and companies. Additionally, Pearson has formed partnerships with educational institutions and technology companies to enhance its product offerings and reach a broader audience. These collaborations often involve shared revenue models that further contribute to its earnings.
Pearson Key Performance Indicators (KPIs)
Any
Revenue by Segment
Analyzes revenue from different business units, highlighting which segments drive growth and profitability, and where there might be challenges or opportunities for expansion.
Analyzes revenue from different business units, highlighting which segments drive growth and profitability, and where there might be challenges or opportunities for expansion.
Data provided by:
Main Street Data
Main Street DataPearson Earnings Call Summary
Earnings Call Date:Aug 01, 2025
(Q2-2025)
| % Change Since: |
Next Earnings Date:Feb 27, 2026
Earnings Call Sentiment Neutral
The earnings call demonstrated a solid financial performance with strategic partnerships and growth in certain segments like Higher Education and Virtual Learning. However, challenges persist with English Language Learning and specific contract delays affecting Pearson VUE and US Student Assessment. Overall, the sentiment is balanced with both positive advancements and ongoing challenges.Q2-2025 Updates
Positive Updates
Solid Financial Performance
Sales increased by 2% on an underlying basis, with adjusted operating profit also up 2% to GBP 242 million. Strong cash performance enabled continued investments and increased shareholder returns.
Virtual Learning Enrollment Growth
Positive enrollment trends with a 5% increase on a same-school basis and 7% including new school openings, setting a platform for accelerated growth in the medium term.
Strategic Partnerships Expansion
New strategic partnerships with Microsoft, AWS, and Google Cloud are expected to enable revenue growth and innovation opportunities. Amazon selected Pearson for workforce development learning product integration.
Higher Education Innovation
Higher Education sales grew 4%, driven by 21% growth in Inclusive Access and 3% growth in U.S. digital subscriptions, with continued AI integration in study tools.
Negative Updates
Challenges in English Language Learning
English Language Learning sales declined by 3%, impacted by a strong comparison period, with PTE business expected to decline in the second half.
VUE and US Student Assessment Declines
Declines in Pearson VUE and US Student Assessment due to paused contracts and headwinds in PDRI, although expected to improve in H2.
Higher Education Enrollment Uncertainty
Higher Education enrollments expected to remain flat, with some federal government spending delays causing superintendent purchasing hesitation.
Company Guidance
In the call, Pearson provided guidance indicating a solid first-half performance for 2025 with sales up by 2% on an underlying basis, aligning with the financial expectations set in February. Adjusted operating profit also rose by 2% to GBP 242 million. Pearson expects stronger growth in the second half of the year, driven by new and renewed contracts in Assessments & Qualifications, enrollment increases in Virtual Learning, and continued expansion into adjacent markets and Enterprise Learning & Skills. The company reiterated its medium-term guidance, emphasizing progress in strategic initiatives such as AI integration and operational improvements. The acquisition of eDynamic Learning, expected to bolster the Early Careers strategy, was highlighted as part of Pearson's growth agenda. The call also touched on the impact of foreign exchange movements, with a noted GBP 45 million reduction in adjusted operating profit due to currency fluctuations.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
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.78
Positive
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.75
Positive
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.82
Very Positive
| 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 |
| EBITDA | 1.11B | 1.10B | 930.00M | 751.00M | 1.01B |
| Net Income | 434.00M | 378.00M | 242.00M | 177.00M | 330.00M |
Balance Sheet | |||||
| Total Assets | 6.89B | 6.73B | 7.31B | 7.34B | 7.45B |
| Cash, Cash Equivalents and Short-Term Investments | 543.00M | 312.00M | 558.00M | 937.00M | 1.10B |
| Total Debt | 1.47B | 1.16B | 1.29B | 1.40B | 1.65B |
| 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
Negative
13.99
Price Trends
14.34
Negative
14.73
Negative
15.34
Negative
Market Momentum
-0.14
Positive
42.84
Neutral
22.99
Neutral
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 13.99 is below the 20-day moving average (MA) of 14.14, below the 50-day MA of 14.34, and below the 200-day MA of 15.34, indicating a bearish trend. The MACD of -0.14 indicates Positive momentum. The RSI at 42.84 is Neutral, neither overbought nor oversold. The STOCH value of 22.99 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative 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 (60)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | 9.47B | 29.76 | 15.25% | 1.07% | 7.82% | 19.39% | |
72 Outperform | $8.95B | 16.17 | 11.74% | 2.13% | 1.93% | 34.40% | |
70 Outperform | 85.23B | 34.41 | 55.56% | 1.75% | 5.32% | 6.06% | |
67 Neutral | 17.80B | 37.06 | 13.45% | 0.66% | -11.42% | 75.42% | |
63 Neutral | 2.12B | 22.31 | 13.27% | 3.54% | -8.50% | ― | |
56 Neutral | 692.82M | -41.94 | -1.20% | 2.90% | 0.97% | -197.80% | |
60 Neutral | $48.67B | 4.58 | -11.27% | 4.14% | 2.83% | -41.78% |
* Communication Services Sector Average
Performance Comparison
PSO
Pearson
13.99
0.69
5.19%
EDUC
Educational Development
1.36
-0.98
-41.88%
WLY
John Wiley Sons Cl A
39.90
-6.82
-14.60%
NYT
New York Times
58.19
3.17
5.76%
SCHL
Scholastic
27.56
-3.30
-10.69%
GCI
Gannett
4.24
-1.38
-24.56%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
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.