Fact based stock research
Pearson (LSE:PSON)

GB0006776081

How to read the free 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.

Pearson stock research in summary

pearson.com

ANALYSIS: With an Obermatt Combined Rank of 25 (worse than 75% compared with investment alternatives), Pearson (Education Services, United Kingdom) shares have somewhat below-average financial characteristics compared with similar stocks. Shares of Pearson are low in value (priced high) with a consolidated Value Rank of 15 (worse than 85% of alternatives) and show below-average growth (Growth Rank of 23) but are safely financed (Safety Rank of 88), which means low debt burdens. ...read more

RECOMMENDATION: A Combined Rank of 25, is a hold 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 15) and low growth (Obermatt Growth Rank of 23), 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. Obermatt Premium subscribers can further check the stock’s Sentiment Ranks, which also flow into the Obermatt 360° View for investors. ...read more

Latest Obermatt Ranks


360° View^new
Sentiment Rank^new
Value Rank	15
Growth Rank	23
Safety Rank	88
Combined Rank	25

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

This stock has achievements: Top 10 Stock.

14-Nov-2024. Stock data may be delayed. Log in or sign up to get the most recent research.

Further information

Multiple opinions. One number.

Analysts rarely agree on a stock’s future. So, who do you believe? Obermatt translates those collective views into a single Sentiment Rank. That plus the financial ranks give you the ultimate 360° View. Sign up to access them.

Why popular stocks have low ratings

It’s easier said than done. When your stock drops, it’s easy to want to sell it and find a better performer. Think twice, or even three times, before trading. Those fees (especially the hidden ones) can eat up your gains.

Review the performance ranks of the individual metrics that form each investment strategy.

Research History: Pearson

RESEARCH HISTORY	2021	2022	2023	2024
VALUE
VALUE	80	82	44	15
GROWTH
GROWTH	17	13	15	23
SAFETY
SAFETY	79	92	90	88
SENTIMENT
SENTIMENT	n/a	76	58	^new
360° VIEW
360° VIEW	n/a	86	57	^new

Most recent update of the stock research: 14-Nov-2024. Financial reporting date used for calculating ranks: 30-Jun-2024. Stock research history is based on the Obermatt Method. The higher the rank, the better Pearson is in the corresponding investment strategy.
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Combined financial peformance in Detail

RESEARCH HISTORY	2021	2022	2023	2024
VALUE
VALUE	80	82	44	15
GROWTH
GROWTH	17	13	15	23
SAFETY
SAFETY	79	92	90	88
COMBINED
COMBINED	74	78	49	25

Last update of combined financial performance: 14-Nov-2024. Stock analysis on combined financial performance: The higher the rank of Pearson the better the performance.

Value Metrics in Detail

ANALYSIS: With an Obermatt Value Rank of 15 (worse than 85% 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 51, which means that the stock price is lower compared with invested capital than for 51% of comparable investments. All other value indicators are below the market median. Price-to-Sales is 15 which means the stock price compared with what market professionals expect for future profits is higher than 85% 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 51 and for the dividend yields rank which is lower than for 57% 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 15, 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. We recommend further analyzing the stock with Obermatt’s Value, Safety, and Sentiment Ranks, including the 360° View, before making an investment decision, which is essential in this case, as the financial indicators are inconclusive. ...read more

VALUE METRICS	2021	2022	2023	2024
PRICE VS. REVENUES (P/S)
PRICE VS. REVENUES (P/S)	45	62	33	15
PRICE VS. PROFITS (P/E)
PRICE VS. PROFITS (P/E)	50	74	39	26
PRICE VS. CAPITAL (Market-to-Book)
PRICE VS. CAPITAL (Market-to-Book)	76	85	63	51
DIVIDEND YIELD
DIVIDEND YIELD	84	61	57	43
CONSOLIDATED RANK: VALUE
CONSOLIDATED RANK: VALUE	80	82	44	15

Last update of Value Rank: 14-Nov-2024. Stock analysis on value ratios: The higher the rank, the lower the value ratio of Pearson; except for dividend yield where the rank is higher, the higher the yield.

Growth Metrics in Detail

ANALYSIS: With an Obermatt Growth Rank of 23 (better than 23% 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 18, which means that, currently, professionals expect the company to grow less than 82% of its competitors. The same is valid for Capital Growth, with a rank of 47, and Profit Growth, with a rank of 31. Currently, professionals expect the company to grow its profits less than 69% of its competitors). Only shareholders are optimistic. Stock Returns are above average at a rank of 61, which means that the stock returns have recently been above 61% of alternative investments. ...read more

RECOMMENDATION: The overall picture with a consolidated Growth Rank of 23, 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. While momentum is a popular investment factor, the value aspect might be the more important one, in the longer term. We recommend analyzing the stock with Obermatt’s Value, Safety, and Sentiment Ranks to arrive at a 360° View of the stock purchase case, especially since the growth performance is low here. ...read more

GROWTH METRICS	2021	2022	2023	2024
REVENUE GROWTH
REVENUE GROWTH	18	20	15	18
PROFIT GROWTH
PROFIT GROWTH	82	34	43	31
CAPITAL GROWTH
CAPITAL GROWTH	n/a	42	21	47
STOCK RETURNS
STOCK RETURNS	28	27	33	61
CONSOLIDATED RANK: GROWTH
CONSOLIDATED RANK: GROWTH	17	13	15	23

Last update of Growth Rank: 14-Nov-2024. Stock analysis on growth metrics: The higher the rank, the higher the growth and returns of Pearson.

Safety Metrics in Detail

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 81, meaning the company has a below-average debt-to-equity ratio. It has less debt than 81% of its competitors. Refinancing is at a rank of 80, meaning that the portion of the debt about to be refinanced is below average. It has less debt in the refinancing stage than 80% of its competitors. Finally, Liquidity is also good at a rank of 75, which means that the company generates more profit to service its debt than 75% 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. Investors may not have a debt issue with Pearson but they should also compare Obermatt’s Value, Growth, and Sentiment Ranks before making a decision. ...read more

SAFETY METRICS	2021	2022	2023	2024
LEVERAGE
LEVERAGE	48	77	81	81
REFINANCING
REFINANCING	96	97	86	80
LIQUIDITY
LIQUIDITY	76	64	75	75
CONSOLIDATED RANK: SAFETY
CONSOLIDATED RANK: SAFETY	79	92	90	88

Last update of Safety Rank: 14-Nov-2024. Stock analysis on safety metrics: The higher the rank, the lower the leverage of Pearson and the more cash is available to service its debt.

Sentiment Metrics in Detail

SENTIMENT	2021	2022	2023	2024
ANALYST OPINIONS
ANALYST OPINIONS	n/a	21	26	^new
OPINIONS CHANGE
OPINIONS CHANGE	n/a	29	40	^new
PRO HOLDINGS
PRO HOLDINGS	n/a	96	63	^new
MARKET PULSE
MARKET PULSE	n/a	80	75	^new
CONSOLIDATED RANK: SENTIMENT
CONSOLIDATED RANK: SENTIMENT	n/a	76	58	^new

Last update of Sentiment Rank: 14-Nov-2024. Stock analysis on sentiment metrics: The higher the rank, the more positive the sentiment for Pearson.
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