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PEARSON PLC-SPONSORED ADR (PSO) Stock Fundamental Analysis

NYSE:PSO - New York Stock Exchange, Inc. - US7050151056 - ADR

15.75  +0.06 (+0.38%)

After market: 15.75 0 (0%)

Fundamental Rating

5

We assign a fundamental rating of 5 out of 10 to PSO. PSO was compared to 71 industry peers in the Diversified Consumer Services industry. Both the profitability and the financial health of PSO get a neutral evaluation. Nothing too spectacular is happening here. PSO has a valuation in line with the averages, but on the other hand it scores bad on growth.


Dividend Valuation Growth Profitability Health

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6

1. Profitability

1.1 Basic Checks

In the past year PSO was profitable.
PSO had a positive operating cash flow in the past year.
PSO had positive earnings in each of the past 5 years.
In the past 5 years PSO always reported a positive cash flow from operatings.
PSO Yearly Net Income VS EBIT VS OCF VS FCFPSO Yearly Net Income VS EBIT VS OCF VS FCFYearly Net Income VS EBIT VS OCF VS FCF 2015 2016 2017 2018 2019 2020 2021 2022 2023 0 -1B -2B

1.2 Ratios

PSO's Return On Assets of 5.20% is fine compared to the rest of the industry. PSO outperforms 74.60% of its industry peers.
The Return On Equity of PSO (9.19%) is better than 65.08% of its industry peers.
With a decent Return On Invested Capital value of 7.31%, PSO is doing good in the industry, outperforming 77.78% of the companies in the same industry.
PSO had an Average Return On Invested Capital over the past 3 years of 4.91%. This is significantly below the industry average of 11.87%.
The 3 year average ROIC (4.91%) for PSO is below the current ROIC(7.31%), indicating increased profibility in the last year.
Industry RankSector Rank
ROA 5.2%
ROE 9.19%
ROIC 7.31%
ROA(3y)3.78%
ROA(5y)3.84%
ROE(3y)6.38%
ROE(5y)6.66%
ROIC(3y)4.91%
ROIC(5y)5.01%
PSO Yearly ROA, ROE, ROICPSO Yearly ROA, ROE, ROICYearly ROA, ROE, ROIC 2015 2016 2017 2018 2019 2020 2021 2022 2023 0 -20 -40

1.3 Margins

PSO's Profit Margin of 9.83% is fine compared to the rest of the industry. PSO outperforms 73.02% of its industry peers.
PSO's Profit Margin has declined in the last couple of years.
The Operating Margin of PSO (14.29%) is better than 79.37% of its industry peers.
PSO's Operating Margin has improved in the last couple of years.
The Gross Margin of PSO (50.58%) is comparable to the rest of the industry.
In the last couple of years the Gross Margin of PSO has remained more or less at the same level.
Industry RankSector Rank
OM 14.29%
PM (TTM) 9.83%
GM 50.58%
OM growth 3Y7.25%
OM growth 5Y9.42%
PM growth 3Y1.93%
PM growth 5Y-6.29%
GM growth 3Y1.34%
GM growth 5Y-1.16%
PSO Yearly Profit, Operating, Gross MarginsPSO Yearly Profit, Operating, Gross MarginsYearly Profit, Operating, Gross Margins 2015 2016 2017 2018 2019 2020 2021 2022 2023 0 20 -20 40 -40

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6

2. Health

2.1 Basic Checks

PSO has a Return on Invested Capital (ROIC), which is below the Cost of Capital (WACC), which means it is destroying value.
Compared to 1 year ago, PSO has less shares outstanding
Compared to 5 years ago, PSO has less shares outstanding
PSO has a worse debt/assets ratio than last year.
PSO Yearly Shares OutstandingPSO Yearly Shares OutstandingYearly Shares Outstanding 2015 2016 2017 2018 2019 2020 2021 2022 2023 200M 400M 600M
PSO Yearly Total Debt VS Total AssetsPSO Yearly Total Debt VS Total AssetsYearly Total Debt VS Total Assets 2015 2016 2017 2018 2019 2020 2021 2022 2023 2B 4B 6B 8B 10B

2.2 Solvency

PSO has an Altman-Z score of 2.86. This is not the best score and indicates that PSO is in the grey zone with still only limited risk for bankruptcy at the moment.
The Altman-Z score of PSO (2.86) is better than 71.43% of its industry peers.
The Debt to FCF ratio of PSO is 3.46, which is a good value as it means it would take PSO, 3.46 years of fcf income to pay off all of its debts.
Looking at the Debt to FCF ratio, with a value of 3.46, PSO is in the better half of the industry, outperforming 69.84% of the companies in the same industry.
PSO has a Debt/Equity ratio of 0.34. This is a healthy value indicating a solid balance between debt and equity.
With a Debt to Equity ratio value of 0.34, PSO perfoms like the industry average, outperforming 44.44% of the companies in the same industry.
Industry RankSector Rank
Debt/Equity 0.34
Debt/FCF 3.46
Altman-Z 2.86
ROIC/WACC0.87
WACC8.42%
PSO Yearly LT Debt VS Equity VS FCFPSO Yearly LT Debt VS Equity VS FCFYearly LT Debt VS Equity VS FCF 2015 2016 2017 2018 2019 2020 2021 2022 2023 0 2B 4B 6B

2.3 Liquidity

PSO has a Current Ratio of 1.78. This is a normal value and indicates that PSO is financially healthy and should not expect problems in meeting its short term obligations.
PSO has a Current ratio of 1.78. This is in the better half of the industry: PSO outperforms 63.49% of its industry peers.
A Quick Ratio of 1.72 indicates that PSO should not have too much problems paying its short term obligations.
Looking at the Quick ratio, with a value of 1.72, PSO is in the better half of the industry, outperforming 65.08% of the companies in the same industry.
Industry RankSector Rank
Current Ratio 1.78
Quick Ratio 1.72
PSO Yearly Current Assets VS Current LiabilitesPSO Yearly Current Assets VS Current LiabilitesYearly Current Assets VS Current Liabilites 2015 2016 2017 2018 2019 2020 2021 2022 2023 1B 2B 3B 4B

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3

3. Growth

3.1 Past

PSO shows a small growth in Earnings Per Share. In the last year, the EPS has grown by 5.86%.
PSO shows a decrease in Earnings Per Share. Measured over the last years, the EPS has been decreasing by -3.85% yearly.
PSO shows a decrease in Revenue. In the last year, the revenue decreased by -9.74%.
The Revenue has been decreasing by -2.31% on average over the past years.
EPS 1Y (TTM)5.86%
EPS 3Y25.73%
EPS 5Y-3.85%
EPS Q2Q%0.39%
Revenue 1Y (TTM)-9.74%
Revenue growth 3Y2.65%
Revenue growth 5Y-2.31%
Sales Q2Q%-6.65%

3.2 Future

The Earnings Per Share is expected to grow by 8.82% on average over the next years. This is quite good.
Based on estimates for the next years, PSO will show a small growth in Revenue. The Revenue will grow by 1.92% on average per year.
EPS Next Y7.54%
EPS Next 2Y8.73%
EPS Next 3Y8.82%
EPS Next 5YN/A
Revenue Next Year-2.43%
Revenue Next 2Y0.72%
Revenue Next 3Y1.92%
Revenue Next 5YN/A

3.3 Evolution

The EPS growth rate is accelerating: in the next years the growth will be better than in the last years.
When comparing the Revenue growth rate of the last years to the growth rate of the upcoming years, we see that the growth is accelerating.
PSO Yearly Revenue VS EstimatesPSO Yearly Revenue VS EstimatesYearly Revenue VS Estimates 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 1B 2B 3B 4B
PSO Yearly EPS VS EstimatesPSO Yearly EPS VS EstimatesYearly EPS VS Estimates 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 0.2 0.4 0.6

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4

4. Valuation

4.1 Price/Earnings Ratio

The Price/Earnings ratio is 21.58, which indicates a rather expensive current valuation of PSO.
Compared to the rest of the industry, the Price/Earnings ratio of PSO indicates a somewhat cheap valuation: PSO is cheaper than 65.08% of the companies listed in the same industry.
PSO is valuated rather cheaply when we compare the Price/Earnings ratio to 27.96, which is the current average of the S&P500 Index.
PSO is valuated rather expensively with a Price/Forward Earnings ratio of 18.30.
PSO's Price/Forward Earnings ratio is a bit cheaper when compared to the industry. PSO is cheaper than 69.84% of the companies in the same industry.
PSO's Price/Forward Earnings ratio indicates a valuation a bit cheaper than the S&P500 average which is at 24.11.
Industry RankSector Rank
PE 21.58
Fwd PE 18.3
PSO Price Earnings VS Forward Price EarningsPSO Price Earnings VS Forward Price Earnings ChartPrice Earnings - Forward Price Earnings PE FPE 5 10 15 20 25

4.2 Price Multiples

PSO's Enterprise Value to EBITDA ratio is a bit cheaper when compared to the industry. PSO is cheaper than 60.32% of the companies in the same industry.
PSO's Price/Free Cash Flow ratio is a bit cheaper when compared to the industry. PSO is cheaper than 71.43% of the companies in the same industry.
Industry RankSector Rank
P/FCF 18.41
EV/EBITDA 12.91
PSO Per share dataPSO EPS, Sales, OCF, FCF, BookValue per sharePer Share Data Per Share 2 4 6

4.3 Compensation for Growth

The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates an expensive valuation of the company.
PSO has a very decent profitability rating, which may justify a higher PE ratio.
PEG (NY)2.86
PEG (5Y)N/A
EPS Next 2Y8.73%
EPS Next 3Y8.82%

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5

5. Dividend

5.1 Amount

With a Yearly Dividend Yield of 1.81%, PSO has a reasonable but not impressive dividend return.
PSO's Dividend Yield is rather good when compared to the industry average which is at 4.24. PSO pays more dividend than 88.89% of the companies in the same industry.
Compared to the average S&P500 Dividend Yield of 2.29, PSO is paying slightly less dividend.
Industry RankSector Rank
Dividend Yield 1.81%

5.2 History

The dividend of PSO has a limited annual growth rate of 4.79%.
PSO has been paying a dividend for at least 10 years, so it has a reliable track record.
PSO has not decreased its dividend in the last 3 years.
Dividend Growth(5Y)4.79%
Div Incr Years4
Div Non Decr Years4
PSO Yearly Dividends per sharePSO Yearly Dividends per shareYearly Dividends per share 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 0.2 0.4 0.6

5.3 Sustainability

PSO pays out 44.41% of its income as dividend. This is a bit on the high side, but may be sustainable.
PSO's earnings are growing more than its dividend. This makes the dividend growth sustainable.
DP44.41%
EPS Next 2Y8.73%
EPS Next 3Y8.82%
PSO Yearly Income VS Free CF VS DividendPSO Yearly Income VS Free CF VS DividendYearly Income VS Free CF VS Dividend 2015 2016 2017 2018 2019 2020 2021 2022 2023 0 -1B -2B
PSO Dividend Payout.PSO Dividend Payout, showing the Payout Ratio.PSO Dividend Payout.PayoutRetained Earnings

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PEARSON PLC-SPONSORED ADR

NYSE:PSO (1/17/2025, 8:22:36 PM)

After market: 15.75 0 (0%)

15.75

+0.06 (+0.38%)

Chartmill FA Rating
GICS SectorConsumer Discretionary
GICS IndustryGroupConsumer Services
GICS IndustryDiversified Consumer Services
Earnings (Last)10-28 2024-10-28
Earnings (Next)N/A N/A
Inst Owners84.37%
Inst Owner Change0.03%
Ins Owners0.2%
Ins Owner ChangeN/A
Market Cap10.46B
Analysts74.44
Price Target15.24 (-3.24%)
Short Float %0.16%
Short Ratio2.64
Dividend
Industry RankSector Rank
Dividend Yield 1.81%
Yearly Dividend0.22
Dividend Growth(5Y)4.79%
DP44.41%
Div Incr Years4
Div Non Decr Years4
Ex-DateN/A
Surprises & Revisions
EPS beat(2)N/A
Avg EPS beat(2)N/A
Min EPS beat(2)N/A
Max EPS beat(2)N/A
EPS beat(4)N/A
Avg EPS beat(4)N/A
Min EPS beat(4)N/A
Max EPS beat(4)N/A
EPS beat(8)N/A
Avg EPS beat(8)N/A
EPS beat(12)N/A
Avg EPS beat(12)N/A
EPS beat(16)N/A
Avg EPS beat(16)N/A
Revenue beat(2)N/A
Avg Revenue beat(2)N/A
Min Revenue beat(2)N/A
Max Revenue beat(2)N/A
Revenue beat(4)N/A
Avg Revenue beat(4)N/A
Min Revenue beat(4)N/A
Max Revenue beat(4)N/A
Revenue beat(8)N/A
Avg Revenue beat(8)N/A
Revenue beat(12)N/A
Avg Revenue beat(12)N/A
Revenue beat(16)N/A
Avg Revenue beat(16)N/A
PT rev (1m)0.2%
PT rev (3m)-0.29%
EPS NQ rev (1m)N/A
EPS NQ rev (3m)N/A
EPS NY rev (1m)-0.01%
EPS NY rev (3m)-1.58%
Revenue NQ rev (1m)N/A
Revenue NQ rev (3m)N/A
Revenue NY rev (1m)0.14%
Revenue NY rev (3m)-0.27%
Valuation
Industry RankSector Rank
PE 21.58
Fwd PE 18.3
P/S 2.42
P/FCF 18.41
P/OCF 14.62
P/B 2.26
P/tB 11.5
EV/EBITDA 12.91
EPS(TTM)0.73
EY4.63%
EPS(NY)0.86
Fwd EY5.46%
FCF(TTM)0.86
FCFY5.43%
OCF(TTM)1.08
OCFY6.84%
SpS6.51
BVpS6.97
TBVpS1.37
PEG (NY)2.86
PEG (5Y)N/A
Profitability
Industry RankSector Rank
ROA 5.2%
ROE 9.19%
ROCE 9.58%
ROIC 7.31%
ROICexc 7.8%
ROICexgc 20.27%
OM 14.29%
PM (TTM) 9.83%
GM 50.58%
FCFM 13.13%
ROA(3y)3.78%
ROA(5y)3.84%
ROE(3y)6.38%
ROE(5y)6.66%
ROIC(3y)4.91%
ROIC(5y)5.01%
ROICexc(3y)5.93%
ROICexc(5y)6.39%
ROICexgc(3y)17.62%
ROICexgc(5y)19.52%
ROCE(3y)6.45%
ROCE(5y)6.57%
ROICexcg growth 3Y-13.06%
ROICexcg growth 5Y10.23%
ROICexc growth 3Y-0.62%
ROICexc growth 5Y7.89%
OM growth 3Y7.25%
OM growth 5Y9.42%
PM growth 3Y1.93%
PM growth 5Y-6.29%
GM growth 3Y1.34%
GM growth 5Y-1.16%
F-Score6
Asset Turnover0.53
Health
Industry RankSector Rank
Debt/Equity 0.34
Debt/FCF 3.46
Debt/EBITDA 1.71
Cap/Depr 47.64%
Cap/Sales 3.41%
Interest Coverage 7.57
Cash Conversion 77.14%
Profit Quality 133.52%
Current Ratio 1.78
Quick Ratio 1.72
Altman-Z 2.86
F-Score6
WACC8.42%
ROIC/WACC0.87
Cap/Depr(3y)46.15%
Cap/Depr(5y)48.06%
Cap/Sales(3y)4.13%
Cap/Sales(5y)4.26%
Profit Quality(3y)92.91%
Profit Quality(5y)84.53%
High Growth Momentum
Growth
EPS 1Y (TTM)5.86%
EPS 3Y25.73%
EPS 5Y-3.85%
EPS Q2Q%0.39%
EPS Next Y7.54%
EPS Next 2Y8.73%
EPS Next 3Y8.82%
EPS Next 5YN/A
Revenue 1Y (TTM)-9.74%
Revenue growth 3Y2.65%
Revenue growth 5Y-2.31%
Sales Q2Q%-6.65%
Revenue Next Year-2.43%
Revenue Next 2Y0.72%
Revenue Next 3Y1.92%
Revenue Next 5YN/A
EBIT growth 1Y48.25%
EBIT growth 3Y10.09%
EBIT growth 5Y6.89%
EBIT Next Year42.78%
EBIT Next 3Y16.15%
EBIT Next 5YN/A
FCF growth 1Y138.97%
FCF growth 3Y16.09%
FCF growth 5Y8.78%
OCF growth 1Y59.51%
OCF growth 3Y10.51%
OCF growth 5Y2.59%