June 22, 2023
Top 10 Stock Pearson Buy Recommendation
How to read the ranks
For every stock, we judge its performance against its peers and rank it on a scale of 1 to 100. The higher the rank, the better the stock performs than its peers. And, we do this for six investment strategies:
Value - shows how good of a value the stock is. Green is "inexpensive"; red is "expensive".
Growth - shows a company's growth potential. Green is "high growth" expected; red is "tough times ahead".
Safety - relates to the amount of debt a company has. Green is low debt level; red is high debt level.
Combined Financial - this isn't an average of the first three ranks but rather a consolidated view across several financial indicators. Green = good; red = tread carefully.
(NEW) Sentiment - quantifies professional analyst ratings and holdings as well as market pulse. Green = positive sentiment; red = skepticism (Only available to Premium Subscribers).
(NEW) 360° View - the ultimate rating with all financial and non-financial indicators.
Snapshot: Pearson – Top 10 Stock in FTSE 100 Index
Pearson is listed as a top 10 stock on June 22, 2023 in the market index FTSE 100 because of its high performance in at least one of the Obermatt investment strategies. As three out of four consolidated Obermatt Ranks exhibit excellent performance, it is a solid investment where the risk of paying too much for the shares is low, despite a currently slow growth momentum. Based on the Obermatt 360° View of 70 (high 70% performer), Obermatt assesses an overall buy recommendation for Pearson on June 22, 2023.
Snapshot: Obermatt Ranks
| Country | United Kingdom |
| Industry | Education Services |
| Index | FTSE All Shares, FTSE 100, FTSE 350, Diversity Europe, Human Rights, Multimedia, Renewables Users |
| Size class | X-Large |
When Obermatt identifies the Top 10 stocks in a market, it’s based on a certain investment strategy. The best performing stocks usually aren’t the ones that everyone is talking about (those are often "over-priced" and have low Value ranks).
For each investment strategy, we provide you with more detailed analysis and our recommendation. You see the ranks of the top 10 stocks ranked by that particular investment strategy (360° View, Sentiment, Value, Growth, Safety and Combined Financial Performance).
360° View: Obermatt 360° View Pearson Buy
| 360 METRICS | June 22, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 62 |
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| GROWTH | ||||||||
| GROWTH | 17 |
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| SAFETY | ||||||||
| SAFETY | 90 |
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| SENTIMENT | ||||||||
| SENTIMENT | 79 |
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| 360° VIEW | ||||||||
| 360° VIEW | 70 |
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ANALYSIS: With an Obermatt 360° View of 70 (better than 70% compared with alternatives), overall professional sentiment and financial characteristics for the stock Pearson are above average. The 360° View is based on consolidating four consolidated indicators, with half of the indicators below and half above average for Pearson. The consolidated Value Rank has an attractive rank of 62, which means that the share price of Pearson is on the lower side compared with typical size in indicators such as revenues, profits, and invested capital. This means the stock price is lower than for 62% of alternative stocks in the same industry. The company is also safely financed with a Safety rank of 90. In addition, professional market sentiment is above average compared with other stock investment alternatives with a Sentiment Rank of 79. But the consolidated Growth Rank has a low rank of 17, which means that the company is below average in terms of growth and momentum when looking at financial metrics such as revenue, profit, and invested capital growth as well as stock returns. 83 of its competitors have better growth. ...read more
RECOMMENDATION: With a 360° View of 70, Pearson is better positioned than 70% of all alternative stock investment opportunities based on the Obermatt Method. Three out of four consolidated Obermatt Ranks show above-average performance. The stock has as good value (Value Rank of 62), secure financing practices (Safety Rank of 90), and positive market sentiment in the professional investor community (Sentiment Rank of 79). It is a solid stock investment where the risk of paying too much for the shares is limited, and disappointments are less likely to occur. The company’s growth expectations are below the industry average (Growth Rank of 17), but that could also be temporary since professional investors remain optimistic despite the low growth numbers. The low price as reflected in the good Value Rank could indicate that the company's future is challenging. The below-par growth performance may be the reason for this. Companies that grow less are typically cheaper than fast-growing competitors. We recommend evaluating whether the future of Pearson is as difficult as the stock’s low price suggests, despite the positive professional investor sentiment. Since the professional community is optimistic, you might have less to worry about, and the stock may just go through a more challenging phase now, indicating good timing. ...read more
Sentiment Strategy: Professional Market Sentiment for Pearson very positive
ANALYSIS: With an Obermatt Sentiment Rank of 79 (better than 79% compared with alternatives) for 2023, overall professional sentiment and engagement for the stock Pearson is very positive. The Sentiment Rank is based on consolidating four sentiment indicators, with all but one indicator above average for Pearson. Analyst Opinions are at a rank of 28 (worse than 72% of alternative investments), which means that currently, stock research analysts tend to warn against investing in the stock of the company. But they are changing their opinions! Analyst Opinions Change has a rank of 71, which indicates a shift in stock research experts opinions for the better. In other words, they are getting more optimistic about stock investments in Pearson. Even better, the Professional Investors rank is 94, meaning that professional investors hold more stock in this company than in 94% of alternative investment opportunities. Pros tend to favor investing in this company. Furthermore, Market Pulse has a rank of 79, which means that the current professional news and professional social networks are upbeat when discussing this company (more positive news than for 79% of competitors). ...read more
RECOMMENDATION: With an Obermatt Sentiment Rank of 79 (more positive than 79% compared with investment alternatives), Pearson has a reputation among professional investors that is significantly higher than that of its competitors. While analysts are still critical of the company, some are changing their minds. In addition, the professional news channels are optimistic, and many institutional investors have already bought stock in the company. These are encouraging signals, despite the still lower level of analyst recommendations. They may be due to a problematic past, and about to change. The positive sentiment signals are stronger than the negative. ...read more
Value Strategy: Pearson Stock Price Value better than average
ANALYSIS: With an Obermatt Value Rank of 62 (better than 62% compared with alternatives), Pearson shares are more attractively priced than the majority of comparable stocks. The Value Rank is based on consolidating four value indicators, with three out of four indicators above average for Pearson. Price-to-Profit (also referred to as price to earnings, P/E ratio) is 63 which means that the stock price compared with what market professionals expect for future profits is lower than for 63% of comparable companies, indicating a good value concerning Pearson's profit levels. The same is valid for the expected Price-to-Book Capital ratio (also referred to as market-to-book ratio) with a Price-to-Capital Rank of 67, and for Dividend Yield with a Dividend Yield Rank of 62. But, compared with other companies in the same industry, the stock price is higher than average as regards expected revenues; only 58% of all competitors have an even higher stock price as regards to sales revenues (a Price-to-Sales Rank of 42). Profits, the level of invested capital, and dividend policy suggest that this stock is attractively priced. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 62, is a BUY recommendation based on Pearson's stock price compared with the company's operational size and dividend yields. Since it is on the expensive side for Price-to-Sales, it may mean that Pearson has pricing power in its distribution market because it can charge higher prices than its competitors. If this is the case, all four value indicators are positive signals for purchasing Pearson shares. ...read more
Growth Strategy: Pearson Growth Momentum negative
ANALYSIS: With an Obermatt Growth Rank of 17 (better than 17% compared with alternatives), Pearson shows one of the most restricted growth dynamics in its industry. There is little momentum in this company. The Growth Rank is based on consolidating four value indicators, with three out of four indicators below average for Pearson. Sales Growth has a below market rank of 12, which means that, currently, professionals expect the company to grow less than 88% of its competitors. The same is valid for Capital Growth, with a rank of 9, and Profit Growth, with a rank of 45. Currently, professionals expect the company to grow its profits less than 55% of its competitors). Only shareholders are optimistic. Stock Returns are above average at a rank of 67, which means that the stock returns have recently been above 67% of alternative investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 17, is a SELL recommendation for growth and momentum investors. That picture may be the result for a company that has reached the bottom. All went south for Pearson, and it still looks bad, but some investors already see light at the end of the tunnel, rewarding the stock with recent above-market stock returns. It could also mean that investors are correcting an overreaction to negative news. If that were the case, the positive stock returns are not yet a sign of recovery. Investors should look closely at the Value and Sentiment indicators before they make a stock purchasing decision, because growth is unlikely to be the driving argument behind this investment. ...read more
Safety Strategy: Pearson Debt Financing Safety very solid
| SAFETY METRICS | June 22, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 82 |
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| REFINANCING | ||||||||
| REFINANCING | 87 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 67 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 90 |
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ANALYSIS: With an Obermatt Safety Rank of 90 (better than 90% compared with alternatives) for 2023, the company Pearson has safe financing practices, which means that their overall debt burden is low. This doesn't mean that the business of Pearson is safe, it only means that the company is on the safer side regarding possible bankruptcy, assuming that public reporting is correct. The Safety Rank is based on consolidating three financing indicators, where all three are above average for Pearson. Leverage is at 82, meaning the company has a below-average debt-to-equity ratio. It has less debt than 82% of its competitors. Refinancing is at a rank of 87, meaning that the portion of the debt about to be refinanced is below average. It has less debt in the refinancing stage than 87% of its competitors. Finally, Liquidity is also good at a rank of 67, which means that the company generates more profit to service its debt than 67% of its competitors. ...read more
RECOMMENDATION: With an Obermatt Safety Rank of 90 (better than 90% compared with alternatives), Pearson has a financing structure that is significantly safer than that of its competitors. These three positive financing indicators signal that the company is less likely to default on its debt obligations. However, it also means that its shareholder returns will be more modest if things go well. A low safety means fewer troubles in downtimes and less upside in good times. ...read more
Combined financial peformance: Pearson Above-Average Financial Performance
| COMBINED PERFORMANCE | June 22, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 62 |
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| GROWTH | ||||||||
| GROWTH | 17 |
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| SAFETY | ||||||||
| SAFETY | 67 |
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| COMBINED | ||||||||
| COMBINED | 63 |
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ANALYSIS: With an Obermatt Combined Rank of 63 (better than 63% compared with investment alternatives), Pearson (Education Services, United Kingdom) shares have above-average financial characteristics compared with similar stocks. Shares of Pearson are a good value (attractively priced) with a consolidated Obermatt Value Rank of 62 (better than 62% of alternatives), are safely financed (Safety Rank of 90, which means low debt burdens), but show below-average growth (Growth Rank of 17). ...read more
RECOMMENDATION: An Obermatt Combined Rank of 63, is a buy recommendation based on Pearson's financial characteristics. As the company Pearson's key financial metrics exhibit good value (Obermatt Value Rank of 62) but low growth (Obermatt Growth Rank of 17) while being safely financed (Obermatt Safety Rank of 90), it may be a safer investment because companies with low debt can better withstand times of crises. Yet the good value, better than 62% of comparable companies, may also indicate that the company's future is challenging. If you believe that low growth is temporary or just due to a specific current event, you may conclude that the good value of the stock provides an attractive investment opportunity and the downside is limited due to below-average financing risks. ...read more
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