September 12, 2024
Top 10 Stock Pearson Sell 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 September 12, 2024 in the market index FTSE 100 because of its high performance in at least one of the Obermatt investment strategies. Only one consolidated Obermatt Rank is above-average. The company is safely financed, but all other facts speak against a stock purchase, especially the low market sentiment by professional investors. Based on the Obermatt 360° View of 22 (22% performer), Obermatt issues an overall sell recommendation for Pearson on September 12, 2024.
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 Sell
| 360 METRICS | September 12, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 21 |
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| GROWTH | ||||||||
| GROWTH | 19 |
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| SAFETY | ||||||||
| SAFETY | 88 |
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| SENTIMENT | ||||||||
| SENTIMENT | 39 |
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| 360° VIEW | ||||||||
| 360° VIEW | 22 |
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ANALYSIS: With an Obermatt 360° View of 22 (better than 22% compared with alternatives), overall professional sentiment and financial characteristics for the stock Pearson are critical, mostly below average. The 360° View is based on consolidating four consolidated indicators, with three out of four metrics below average for Pearson. The only rank that is above average is the consolidated Safety Rank at 88, which means that the company has a financing structure that is safer than those of 88% comparable companies when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. But the Value, Growth and Sentiment Ranks are all below average. The consolidated Value Rank has a less desirable rank of 21, which means that the share price of Pearson is on the high side compared with typical size in indicators such as revenues, profits, and invested capital. The consolidated Growth Rank also has a low rank of 19, which implies that the company exhibits below-average growth momentum when looking at financial metrics such as revenue, profit, and invested capital growth as well as stock returns. Finally, the consolidated Sentiment Rank is also low at a rank of 39, which means that professional investors are more pessimistic about the stock than for 61% of alternative investment opportunities. While Safety is strong, it’s not the most critical indicator, so we suggest proceeding with caution if you are considering this stock. ...read more
RECOMMENDATION: With a consolidated 360° View of 22, Pearson is worse than 78% of all alternative stock investment opportunities based on the Obermatt Method. This means that Pearson shares are on the riskier side for investors. As only the financing structure, namely the Safety Rank, is on the safer side and all other consolidated Obermatt Ranks are below-average, this is a riskier stock investment proposition. This is especially the case, since professional investor sentiment, the consolidated Obermatt Sentiment Rank, is also low at 39. The negative market view on Pearson may be the high stock price (low value) or the low level of growth. This is a problem. As the Safety Rank is the least significant of the four consolidated Obermatt Ranks, we cannot identify enough positive facts that are visible today to make a case for this stock investment. The company may have a strong future which would justify the high stock price, but this is not visible from investor behavior today. As market sentiment is critical, you should be careful with paying more than market-average for this stock, and conduct further research into the company's future growth potential. Prudent investors may only want to invest a smaller portion of their wealth in such situations. Young investors can carry more risk but should still thrive for sufficient diversification. ...read more
Sentiment Strategy: Professional Market Sentiment for Pearson only reserved
ANALYSIS: With an Obermatt Sentiment Rank of 39 (better than 39% compared with alternatives), overall professional sentiment and engagement for the stock Pearson is below industry average. The Sentiment Rank is based on consolidating four sentiment indicators, with half of the metrics below and half above average for Pearson. Analyst Opinions are at a rank of 16 (worse than 84% of alternative investments), which means that currently, stock research analysts tend to warn against investing in the stock of the company. Worse, Analyst Opinions Change has a rank of 31, which means that stock research experts are getting even more pessimistic. Other sentiment indicators are positive: The Professional Investors rank is 73, which means that professional investors hold more stock in this company than in 73% of alternative investment opportunities. So, pros tend to favor investing in this company. In addition, Market Pulse has a rank of 73, which means that the current professional news and professional social networks tend to be positive when discussing this company (more positive news than for 73% of competitors). While stock research analysts are getting ever more critical, many professional investors are committed to Pearson and the professional news channels are on the positive side. ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 39 (less encouraging than 61% compared with investment alternatives), Pearson has a reputation among professional investors that is below that of its competitors. This is an ambiguous picture: analysts are negative and getting even more critical, while the news in the market is positive. Who should investors believe? This is a difficult question in such a situation. Investors should proceed cautiously and verify not only the financial performance in the Obermatt Value, Growth and Safety Ranks but also independent news coverage of the company. ...read more
Value Strategy: Pearson Stock Price Value low
ANALYSIS: With an Obermatt Value Rank of 21 (worse than 79% compared with alternatives), Pearson shares are significantly more expensive than comparable stocks. The Value Rank is based on consolidating four value indicators where three out of four are below average for Pearson. Only the Price-to-Book Capital ratio (also referred to as market-to-book ratio) indicates good stock value with a Price-to-Book Rank of 54, which means that the stock price is lower compared with invested capital than for 54% of comparable investments. All other value indicators are below the market median. Price-to-Sales is 23 which means the stock price compared with what market professionals expect for future profits is higher than 77% of comparable companies, indicating a low value concerning Pearson's revenue levels. The same is valid for the Price-to-Book Capital ratio (also referred to as market-to-book ratio) with a Price-to-Book Rank of 54 and for the dividend yields rank which is lower than for 51% of comparable companies, making the stock more expensive as regards to with the company's expected dividend payouts. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 21, is a sell recommendation based on Pearson's stock price compared with the company's operational size and dividend yields. Why are market participants paying such a high price for Pearson, where three out of four value indicators are below par? One reason could be that the company is well financed, indicated by the high book capital level, and has a promising future that is not yet visible in reported revenues and profits. That would also explain the low dividend yield because the company needs the cash to invest in its future. If investors can verify a picture in this sense, the stock may still be a good investment, even though current company-reported financials don't fully explain current stock prices. ...read more
Growth Strategy: Pearson Growth Momentum negative
| GROWTH METRICS | September 12, 2024 | |||||||
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| REVENUE GROWTH | ||||||||
| REVENUE GROWTH | 16 |
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| PROFIT GROWTH | ||||||||
| PROFIT GROWTH | 30 |
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| CAPITAL GROWTH | ||||||||
| CAPITAL GROWTH | 59 |
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| STOCK RETURNS | ||||||||
| STOCK RETURNS | 57 |
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| CONSOLIDATED RANK: GROWTH | ||||||||
| CONSOLIDATED RANK: GROWTH | 19 |
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ANALYSIS: With an Obermatt Growth Rank of 19 (better than 19% 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 half of the indicators below and half above average for Pearson. Capital Growth has a rank of 59, which means that currently professionals expect the company to grow its invested capital more than 30% of its competitors. Investors welcomed this, visible in the Stock Returns rank of 57 (above 57% of alternative investments). But Sales Growth has only a rank of 16, which means that, currently, professionals expect the company to grow less than 84% of its competitors, and Profit Growth is also low at a rank of 30. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 19, is a sell recommendation for growth and momentum investors. This is an ambiguous picture. Revenue growth and capital growth are strong, but the growth in profit, which seems good, can also be an indication that growth momentum may be negative. The fact that stock returns have been above average doesn't help much, as stock returns are less reliable in showing a company’s future growth potential. Prices may perform well for the simple reason that investors were too pessimistic in the past and are now correcting their opinions and moving the stock price to a more reasonable level. As the growth picture is mixed for Pearson, investors may want to look at value and sentiment indicators for a well-rounded picture of this stock. ...read more
Safety Strategy: Pearson Debt Financing Safety very solid
| SAFETY METRICS | September 12, 2024 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 82 |
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| REFINANCING | ||||||||
| REFINANCING | 79 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 76 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 88 |
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ANALYSIS: With an Obermatt Safety Rank of 88 (better than 88% compared with alternatives) for 2024, 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 79, meaning that the portion of the debt about to be refinanced is below average. It has less debt in the refinancing stage than 79% of its competitors. Finally, Liquidity is also good at a rank of 76, which means that the company generates more profit to service its debt than 76% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 88 (better than 88% 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 Lowest Financial Performance
| COMBINED PERFORMANCE | September 12, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 21 |
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| GROWTH | ||||||||
| GROWTH | 19 |
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| SAFETY | ||||||||
| SAFETY | 76 |
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| COMBINED | ||||||||
| COMBINED | 24 |
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ANALYSIS: With an Obermatt Combined Rank of 24 (worse than 76% compared with investment alternatives), Pearson (Education Services, United Kingdom) shares have lower financial characteristics compared with similar stocks. Shares of Pearson are low in value (priced high) with a consolidated Value Rank of 21 (worse than 79% of alternatives) and show below-average growth (Growth Rank of 19) but are safely financed (Safety Rank of 88), which means low debt burdens. ...read more
RECOMMENDATION: A Combined Rank of 24, is a sell recommendation based on Pearson's financial characteristics. As the company Pearson's critical financial metrics exhibit below-average performance, such as low value (Obermatt Value Rank of 21) and low growth (Obermatt Growth Rank of 19), it is a somewhat questionable stock investment, where the risk of paying too much for the shares is significant, unless the company has an exceptionally bright future. In this case, good financing practices (Obermatt Safety Rank of 88) are a positive sign, because it may allow the company to weather challenging times until the hoped-for cash flows materialize. This may be true for high-tech or biotechnology companies with enough cash to sustain prolonged business development. If they own properties that only provide cash flows in the future, the stock may look excessively expensive and unattractive today. In such cases, the Obermatt Method has limited value, as it is based on facts we can observe today. If the facts lie all in the future, stock investing becomes guesswork, and this should only be a driver in a limited number of investments that account for a small fraction of a safe portfolio. ...read more
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