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Pearson Plc (PSO)
NYSE:PSO
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Pearson
(NYSE:PSO)
Rating:72Outperform
Price Target:
$16.50
▲(10.15%Upside)
Pearson (PSO) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$9.63B
Dividend Yield2.12%
Average Volume (3M)642.42K
Price to Earnings (P/E)18.2
Beta (1Y)0.33
Revenue Growth-0.59%
EPS Growth24.06%
CountryUS
Employees17,116
SectorCommunication Services
Sector Strength88
IndustryPublishing
Share Statistics
EPS (TTM)0.46
Shares Outstanding656,871,460
10 Day Avg. Volume642,125
30 Day Avg. Volume642,423
Financial Highlights & Ratios
PEG Ratio-4.38
Price to Book (P/B)2.10
Price to Sales (P/S)0.00
P/FCF Ratio16.24
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 Upside13.48% Upside
Rating ConsensusHold
Number of Analyst Covering1
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 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 Earnings Call Summary
Earnings Call Date:Feb 28, 2025
(Q4-2024)
| % Change Since: -9.98%|
Next Earnings Date:Aug 04, 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.Q4-2024 Updates
Positive Updates
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.
Negative Updates
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.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 | |||||
| TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 3.55B | 3.55B | 3.67B | 3.84B | 3.43B | 3.40B | Gross Profit |
| 1.79B | 1.81B | 1.83B | 1.79B | 1.68B | 1.63B | EBIT |
| 501.00M | 541.00M | 498.00M | 271.00M | 183.00M | 283.00M | EBITDA |
| 872.00M | 1.11B | 1.10B | 930.00M | 751.00M | 1.01B | Net Income Common Stockholders |
| 349.00M | 434.00M | 378.00M | 242.00M | 177.00M | 330.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 1.75B | 543.00M | 312.00M | 543.00M | 937.00M | 1.10B | Total Assets |
| 10.67B | 6.89B | 6.73B | 7.31B | 7.34B | 7.45B | Total Debt |
| 2.31B | 1.47B | 1.16B | 1.22B | 1.40B | 1.65B | Net Debt |
| 576.00M | 929.00M | 849.00M | 672.00M | 463.00M | 554.00M | Total Liabilities |
| 5.06B | 2.84B | 2.74B | 2.89B | 3.06B | 3.32B | Stockholders Equity |
| 5.54B | 4.04B | 3.97B | 4.40B | 4.27B | 4.13B |
| Cash Flow | Free Cash Flow | ||||
| 516.00M | 503.00M | 399.00M | 304.00M | 150.00M | 255.00M | Operating Cash Flow |
| 897.00M | 627.00M | 525.00M | 361.00M | 326.00M | 389.00M | Investing Cash Flow |
| -448.00M | -131.00M | -301.00M | 13.00M | -80.00M | 591.00M | Financing Cash Flow |
| -463.00M | -241.00M | -450.00M | -804.00M | -414.00M | -299.00M |
Pearson Technical Analysis
Negative
14.98
Price Trends
15.84
Negative
16.08
Negative
15.26
Negative
Market Momentum
-0.20
Positive
34.60
Neutral
13.11
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 14.98 is below the 20-day moving average (MA) of 15.95, below the 50-day MA of 15.84, and below the 200-day MA of 15.26, indicating a bearish trend. The MACD of -0.20 indicates Positive momentum. The RSI at 34.60 is Neutral, neither overbought nor oversold. The STOCH value of 13.11 is Positive, 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 2 New Risks
1.
Sustainability risks may adversely impact the Group's business, if not managed appropriately Q4, 2024
2.
Failure to develop robust go-to-market strategies could negatively impact the Group's financial performance. Q4, 2024
Pearson Peers Comparison
Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | $9.10B | 30.44 | 16.68% | 1.02% | 6.85% | 21.26% | |
77 Outperform | $98.68B | 40.53 | 56.34% | 1.49% | 5.86% | 13.13% | |
75 Outperform | $16.51B | 32.58 | 5.88% | 0.72% | -5.43% | 135.46% | |
72 Outperform | $9.63B | 18.18 | 10.99% | 2.12% | -0.59% | 24.06% | |
67 Neutral | $481.45M | 30.27 | 1.92% | 4.43% | -3.10% | -58.47% | |
61 Neutral | $14.59B | 5.85 | -4.31% | 3.69% | 2.76% | -30.36% | |
46 Neutral | $2.06B | 51.55 | 5.77% | 3.69% | -11.77% | ― |
* Communication Services Sector Average
Performance Comparison
PSO
Pearson
14.98
3.10
26.09%
WLY
John Wiley Sons Cl A
38.26
3.15
8.97%
NYT
New York Times
55.82
5.65
11.26%
NWSA
News Corp
27.81
0.80
2.96%
SCHL
Scholastic
18.06
-15.03
-45.42%
RELX
Relx
53.68
9.59
21.75%
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.