Pearson (PSO) AI Stock Analysis

• Market Cap: $9.13B
• Dividend Yield: 0.14%
• Average Volume (3M): 654.96K
• Price to Earnings (P/E): 17.5
• Beta (1Y): 0.31
• Revenue Growth: -0.59%
• EPS Growth: 24.06%
• Country: US
• Employees: 17,116
• Sector: Communication Services
• Sector Strength: 76
• Industry: Publishing
• EPS (TTM): 0.46
• Shares Outstanding: 650,423,770
• 10 Day Avg. Volume: 585,194
• 30 Day Avg. Volume: 654,962
• PEG Ratio: 0.58
• Price to Book (P/B): 1.72
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 8.03
• 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: $16.50
• Price Target Upside: 15.30% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 0

• Rating: 72 Outperform
• Price Target: $16.50 ▲(15.30%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 that includes the sale of educational materials, digital learning products, and assessment services. Key revenue streams for the company include the sale of textbooks and digital resources to educational institutions and learners, licensing fees from digital platforms, and fees from professional certification and testing services. Significant partnerships with educational institutions, governments, and corporate entities also contribute to Pearson's earnings, as these collaborations often involve long-term contracts and recurring revenue. Additionally, Pearson's strategic focus on digital transformation has allowed it to expand its offerings in the online learning and assessment space, which has become increasingly important in the global education market.

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
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	543.00M	937.00M	1.10B
Total Debt	1.47B	1.16B	1.22B	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

• Technical Analysis Sentiment: Negative
• Last Price: 14.31
• 50DMA: Negative
• 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 Negative. The current price of 14.31 is below the 20-day moving average (MA) of 14.48, below the 50-day MA of 15.04, and below the 200-day MA of 15.43, indicating a bearish trend. The MACD of -0.19 indicates Negative momentum. The RSI at 41.69 is Neutral, neither overbought nor oversold. The STOCH value of 59.32 is Neutral, 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
NWSA	79 Outperform	$17.41B	34.47	5.88%	0.68%	-5.43%	135.46%
NYT	75 Outperform	$8.62B	28.80	16.68%	1.17%	6.85%	21.26%
RELX	75 Outperform	$97.61B	39.93	70.68%	0.03%	5.32%	6.06%
PSO	72 Outperform	$9.13B	17.51	10.99%	0.14%	-0.59%	24.06%
WLY	68 Neutral	$2.11B	25.69	11.28%	3.60%	-10.43%	―
SCHL	66 Neutral	$574.49M	37.85	-0.19%	3.00%	-3.10%	-58.47%
Sector *	62 Neutral	$42.18B	-1.56	-12.06%	2.81%	2.10%	-71.01%