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Pearson
(NYSE:PSO)
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Rating:65Neutral
Price Target:
$18.00
▲(22.78% Upside)
Action:Reiterated
Date:07/03/26
PSO scores 65 driven primarily by solid underlying profitability and improving free cash flow, reinforced by a generally positive earnings outlook and continued margin/cash-conversion targets. The score is held back by multi-year revenue declines, rising leverage, a somewhat demanding P/E for the growth profile, and technically overbought momentum signals that elevate near-term volatility risk.
Positive Factors
Free Cash Flow Strength
High free cash flow conversion (about 96% of net income in 2025) supports durable capital allocation: funds technology investment, buybacks, and debt servicing without relying on external financing. This underpins funding of digital transition and cushions execution risk over the medium term.
Negative Factors
Multi‑year Revenue Declines
Three consecutive years of revenue decline indicate structural top‑line weakness that cost cuts alone may not offset. Sustained revenue erosion makes it harder to meet medium‑term sales CAGR targets, limits operating leverage upside, and raises reliance on one‑off gains or enterprise deals to restore growth.
Read all positive and negative factors
Positive Factors
Negative Factors
Free Cash Flow Strength
High free cash flow conversion (about 96% of net income in 2025) supports durable capital allocation: funds technology investment, buybacks, and debt servicing without relying on external financing. This underpins funding of digital transition and cushions execution risk over the medium term.
Read all positive factors
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:
The Fly
The FlyPearson (PSO) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$10.57B
Dividend Yield2.11%
Average Volume (3M)748.90K
Price to Earnings (P/E)23.6
Beta (1Y)0.29
Revenue Growth3.91%
EPS Growth-19.81%
CountryUS
Employees17,116
SectorCommunication Services
Sector Strength97
IndustryPublishing
Share Statistics
EPS (TTM)0.52
Shares Outstanding598,496,030
10 Day Avg. Volume670,296
30 Day Avg. Volume748,897
Financial Highlights & Ratios
PEG Ratio-1.01
Price to Book (P/B)1.86
Price to Sales (P/S)1.90
P/FCF Ratio10.50
Enterprise Value/Market Cap0.76
Enterprise Value/Revenue2.25
Enterprise Value/Gross Profit4.34
Enterprise Value/Ebitda8.86
Forecast
1Y Price Target
$17.40Price Target Upside18.69% Upside
Rating ConsensusHold
Number of Analyst Covering1
EPS Forecast (FY)0.94
Revenue Forecast (FY)$4.98B
Pearson Business Overview & Revenue Model
Company Description
Pearson plc is a prominent international provider of educational content, evaluations, and related services. Its operations span the globe, with a significant presence in regions such as the United Kingdom, the United States, Canada, the Asia Paci...
How the Company Makes Money
Pearson makes money primarily by selling education content and delivering learning and assessment services, with an increasing emphasis on digital and subscription-like models. Key revenue streams include: (1) Higher education courseware and platf...
Pearson Earnings Call Summary
Earnings Call Date:Feb 27, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Aug 03, 2026
Earnings Call Sentiment Positive
The call presented a broadly positive picture: Pearson delivered steady underlying revenue and profit growth, strong free cash generation, margin improvement, and considerable progress embedding AI and signing major enterprise partnerships that create a multi-year revenue backlog. Counterbalancing this are a non-cash GBP 87m impairment that reduced statutory profit, near-term A&Q headwinds from the New Jersey contract loss and PDRI, FX and interest cost pressures, and some execution/recognition timing risks around enterprise deal phasing. On balance, the highlights — recurring cashflows, margin progress, enterprise momentum and AI-driven efficiency gains — outweigh the near-term lowlights and one-off charges.Positive Updates
Overall Financial Performance
Underlying sales grew 4% in FY2025; underlying adjusted operating profit increased 6% to GBP 614 million; adjusted operating margin expanded from 16.9% to 17.2%; adjusted EPS rose 4% to 64.5p (9% at constant FX).
Negative Updates
Statutory Profit Decline and One-Off Impairment
Statutory profit declined 6% in 2025, principally due to a non-cash impairment of GBP 87 million related to Higher Education platform consolidation (four courseware platforms converging to one). The company notes this is one-off and mechanical benefits of ~GBP 15 million p.a. over the next six years.
Read all updates
Q4-2025 Updates
Positive
Negative
Overall Financial Performance
Underlying sales grew 4% in FY2025; underlying adjusted operating profit increased 6% to GBP 614 million; adjusted operating margin expanded from 16.9% to 17.2%; adjusted EPS rose 4% to 64.5p (9% at constant FX).
Read all positive updates
Company Guidance
Pearson guided 2026 to mid‑single‑digit underlying sales growth and adjusted operating profit of GBP 640–685m (at end‑2025 FX), with free cash conversion of 90–100%, an effective tax rate of ~25% and interest of circa GBP 80m; it reiterated a medium‑term plan of mid‑single‑digit CAGR sales, ~40 basis points of margin expansion per year and sustained 90–100% average free‑cash conversion. For context, 2025 delivered underlying sales +4%, adjusted operating profit GBP 614m (+6% underlying), margin 17.2% (up from 16.9%), adjusted EPS 64.5p (+4% reported, +9% at constant FX), free cash flow conversion 125% (98% excluding state aid), net debt GBP 1.1bn (leverage 1.3x), return on capital 11.3% (+80bps) and a new GBP 350m buyback; 2025 also realized ~200bps margin from cost savings and recorded a one‑off GBP 87m impairment (generating ~GBP 15m p.a. mechanical profit improvement over six years).Pearson Financial Statement Overview
Summary
Income Statement
62
Positive
Balance Sheet
58
Neutral
Cash Flow
72
Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 3.58B | 3.55B | 3.67B | 3.84B | 3.43B |
| Gross Profit | 1.86B | 1.81B | 1.83B | 1.79B | 1.68B |
| EBITDA | 1.10B | 1.11B | 1.10B | 930.00M | 751.00M |
| Net Income | 327.66M | 434.00M | 378.00M | 242.00M | 177.00M |
Balance Sheet | |||||
| Total Assets | 6.45B | 6.89B | 6.73B | 7.31B | 7.34B |
| Cash, Cash Equivalents and Short-Term Investments | 332.41M | 543.00M | 312.00M | 558.00M | 937.00M |
| Total Debt | 1.48B | 1.47B | 1.16B | 1.24B | 1.40B |
| Total Liabilities | 2.79B | 2.84B | 2.74B | 2.91B | 3.06B |
| Stockholders Equity | 3.64B | 4.04B | 3.97B | 4.40B | 4.27B |
Cash Flow | |||||
| Free Cash Flow | 646.51M | 503.00M | 399.00M | 304.00M | 150.00M |
| Operating Cash Flow | 674.88M | 627.00M | 525.00M | 361.00M | 326.00M |
| Investing Cash Flow | -270.93M | -131.00M | -301.00M | 13.00M | -80.00M |
| Financing Cash Flow | -595.65M | -241.00M | -450.00M | -804.00M | -414.00M |
Pearson Technical Analysis
Positive
14.66
Price Trends
15.44
Positive
14.38
Positive
13.86
Positive
Market Momentum
0.51
Negative
58.52
Neutral
70.95
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PSO, the sentiment is Positive. The current price of 14.66 is below the 20-day moving average (MA) of 15.95, below the 50-day MA of 15.44, and above the 200-day MA of 13.86, indicating a bullish trend. The MACD of 0.51 indicates Negative momentum. The RSI at 58.52 is Neutral, neither overbought nor oversold. The STOCH value of 70.95 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for PSO.
Pearson Risk Analysis
Pearson disclosed 31 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
UnderperformOutperform
Sector (60)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
75 Outperform | $2.56B | 11.80 | 18.41% | 4.48% | -0.06% | 173.86% | |
73 Outperform | $12.15B | 31.06 | 19.22% | 0.95% | 10.41% | 27.40% | |
66 Neutral | $12.62M | 4.23 | 9.96% | ― | -34.31% | ― | |
66 Neutral | $1.01B | 18.12 | 6.91% | 2.78% | 1.38% | 296.53% | |
65 Neutral | $10.57B | 23.63 | 9.26% | 2.11% | 3.91% | -19.81% | |
60 Neutral | $48.67B | 4.58 | -11.27% | 4.14% | 2.83% | -41.78% |
* Communication Services Sector Average
PSO
Pearson
16.57
2.75
19.86%
EDUC
Educational Development
1.48
0.18
13.85%
WLY
John Wiley Sons Cl A
49.27
9.95
25.29%
NYT
New York Times
72.98
19.24
35.81%
SCHL
Scholastic
46.75
26.11
126.49%
Pearson Corporate Events
Pearson Discloses Increased 12.02% Stake Held by Artisan Partners
Jun 29, 2026
Pearson has disclosed a change in its shareholder base after U.S.-based asset manager Artisan Partners Limited Partnership increased its stake in the company, crossing a regulatory threshold on 24 June 2026. Artisan now controls 72,267,456 voting ...
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.