Pearson (PSO) AI Stock Analysis

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Pearson

(NYSE:PSO)

Rating:72Outperform

Price Target:

$16.50

▲(16.28%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 (PSO) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$9.08B

Dividend Yield2.94%

Average Volume (3M)681.26K

Price to Earnings (P/E)17.3

Beta (1Y)0.31

Revenue Growth-0.59%

EPS Growth24.06%

CountryUS

Employees17,116

SectorCommunication Services

Sector Strength81

IndustryPublishing

Share Statistics

EPS (TTM)0.46

Shares Outstanding651,271,500

10 Day Avg. Volume638,743

30 Day Avg. Volume681,263

Financial Highlights & Ratios

PEG Ratio0.58

Price to Book (P/B)1.72

Price to Sales (P/S)0.00

P/FCF Ratio8.03

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$16.50

Price Target Upside16.28% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering0

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 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 Key Performance Indicators (KPIs)

Any

Revenue by Segment

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.

Chart InsightsPearson's 'Assessment & Qualifications' segment shows consistent growth, reflecting a strategic focus on this area. Conversely, 'Virtual Learning' and 'Higher Education' segments are experiencing declines, potentially indicating shifts in market demand or competitive pressures. The 'International' and 'Global Online Learning' segments have ceased contributing to revenue, possibly due to strategic realignment or divestitures. These trends suggest Pearson is concentrating resources on segments with higher growth potential while phasing out less profitable areas.

Data provided by:

Main Street Data

Pearson Earnings Call Summary

Earnings Call Date:Feb 28, 2025

(Q4-2024)

% Change Since: -14.72%|

Next Earnings Date:Aug 01, 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 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

Positive

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

Positive

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

Very Positive

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 Price14.19

Price Trends

50DMA

15.18

Negative

100DMA

15.61

Negative

200DMA

15.41

Negative

Market Momentum

MACD

-0.25

Positive

RSI

34.59

Neutral

STOCH

11.84

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 14.19 is below the 20-day moving average (MA) of 14.55, below the 50-day MA of 15.18, and below the 200-day MA of 15.41, indicating a bearish trend. The MACD of -0.25 indicates Positive momentum. The RSI at 34.59 is Neutral, neither overbought nor oversold. The STOCH value of 11.84 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 0 New Risks

Pearson Peers Comparison

Overall Rating

UnderperformOutperform

Sector (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
NWSA	79 Outperform	$17.78B	35.34	5.88%	0.66%	-5.43%	135.46%
NYT	75 Outperform	$8.78B	29.37	16.68%	1.34%	6.85%	21.26%
RELX	75 Outperform	$98.07B	40.35	56.34%	2.09%	―	―
PSO	72 Outperform	$9.08B	17.28	10.99%	2.94%	-0.59%	24.06%
WLY	68 Neutral	$2.10B	25.59	11.28%	3.56%	-10.43%	―
SCHL	66 Neutral	$568.36M	35.74	1.92%	3.74%	-3.10%	-58.47%
Sector *	62 Neutral	$41.14B	-1.94	-12.06%	3.94%	2.09%	-69.68%

* Communication Services Sector Average

Performance Comparison

PSO

Pearson

14.19

1.21

9.32%

WLY

John Wiley Sons Cl A

39.28

-6.23

-13.69%

NYT

New York Times

53.30

-1.15

-2.11%

NWSA

News Corp

29.86

2.34

8.50%

SCHL

Scholastic

21.32

-7.38

-25.71%

RELX

Relx

52.90

7.90

17.56%

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.Date of analysis: Jun 04, 2025