PEARSON PLC-SPONSORED ADR (PSO) Stock Fundamental Analysis
NYSE:PSO - New York Stock Exchange, Inc. - US7050151056 - ADR - Currency: USD
Taking everything into account, PSO scores 6 out of 10 in our fundamental rating. PSO was compared to 72 industry peers in the Diversified Consumer Services industry. PSO has an excellent profitability rating, but there are some minor concerns on its financial health. PSO has a decent growth rate and is not valued too expensively.
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.
Each year in the past 5 years PSO had a positive operating cash flow.
1.2 Ratios
Looking at the Return On Assets, with a value of 6.30%, PSO is in the better half of the industry, outperforming 73.61% of the companies in the same industry.
Looking at the Return On Equity, with a value of 10.75%, PSO is in the better half of the industry, outperforming 70.83% of the companies in the same industry.
PSO has a better Return On Invested Capital (8.19%) than 81.94% of its industry peers.
Measured over the past 3 years, the Average Return On Invested Capital for PSO is below the industry average of 11.25%.
The last Return On Invested Capital (8.19%) for PSO is above the 3 year average (6.70%), which is a sign of increasing profitability.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 6.3% | ||
| ROE | 10.75% | ||
| ROIC | 8.19% |
ROA(3y)5.07%
ROA(5y)4.41%
ROE(3y)8.59%
ROE(5y)7.58%
ROIC(3y)6.7%
ROIC(5y)5.84%
1.3 Margins
PSO's Profit Margin of 12.22% is amongst the best of the industry. PSO outperforms 81.94% of its industry peers.
PSO's Profit Margin has improved in the last couple of years.
With an excellent Operating Margin value of 15.37%, PSO belongs to the best of the industry, outperforming 80.56% of the companies in the same industry.
In the last couple of years the Operating Margin of PSO has grown nicely.
Looking at the Gross Margin, with a value of 50.99%, PSO is in line with its industry, outperforming 59.72% of the companies in the same industry.
PSO's Gross Margin has been stable in the last couple of years.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 15.37% | ||
| PM (TTM) | 12.22% | ||
| GM | 50.99% |
OM growth 3Y25.2%
OM growth 5Y6.89%
PM growth 3Y33.26%
PM growth 5Y12.36%
GM growth 3Y1.31%
GM growth 5Y-0.38%
2. Health
2.1 Basic Checks
With a Return on Invested Capital (ROIC) below the Cost of Capital (WACC), PSO is destroying value.
PSO has less shares outstanding than it did 1 year ago.
PSO has less shares outstanding than it did 5 years ago.
PSO has a worse debt/assets ratio than last year.
2.2 Solvency
An Altman-Z score of 2.83 indicates that PSO is not a great score, but indicates only limited risk for bankruptcy at the moment.
With a decent Altman-Z score value of 2.83, PSO is doing good in the industry, outperforming 68.06% of the companies in the same industry.
PSO has a debt to FCF ratio of 2.93. This is a good value and a sign of high solvency as PSO would need 2.93 years to pay back of all of its debts.
PSO has a Debt to FCF ratio of 2.93. This is in the better half of the industry: PSO outperforms 73.61% of its industry peers.
A Debt/Equity ratio of 0.29 indicates that PSO is not too dependend on debt financing.
The Debt to Equity ratio of PSO (0.29) is comparable to the rest of the industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.29 | ||
| Debt/FCF | 2.93 | ||
| Altman-Z | 2.83 |
ROIC/WACC0.97
WACC8.47%
2.3 Liquidity
A Current Ratio of 1.85 indicates that PSO should not have too much problems paying its short term obligations.
With a decent Current ratio value of 1.85, PSO is doing good in the industry, outperforming 75.00% of the companies in the same industry.
PSO has a Quick Ratio of 1.80. This is a normal value and indicates that PSO is financially healthy and should not expect problems in meeting its short term obligations.
Looking at the Quick ratio, with a value of 1.80, PSO is in the better half of the industry, outperforming 75.00% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.85 | ||
| Quick Ratio | 1.8 |
3. Growth
3.1 Past
PSO shows a small growth in Earnings Per Share. In the last year, the EPS has grown by 5.89%.
The Earnings Per Share has been growing slightly by 1.15% on average over the past years.
The Revenue has decreased by -3.32% in the past year.
The Revenue has been decreasing by -1.70% on average over the past years.
EPS 1Y (TTM)5.89%
EPS 3Y20.87%
EPS 5Y1.15%
EPS Q2Q%10.25%
Revenue 1Y (TTM)-3.32%
Revenue growth 3Y1.19%
Revenue growth 5Y-1.7%
Sales Q2Q%0.17%
3.2 Future
PSO is expected to show quite a strong growth in Earnings Per Share. In the coming years, the EPS will grow by 9.68% yearly.
Based on estimates for the next years, PSO will show a small growth in Revenue. The Revenue will grow by 3.20% on average per year.
EPS Next Y9.54%
EPS Next 2Y9.77%
EPS Next 3Y9.68%
EPS Next 5YN/A
Revenue Next Year1.13%
Revenue Next 2Y2.52%
Revenue Next 3Y3.2%
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.
The Revenue growth rate is accelerating: in the next years the growth will be better than in the last years.
4. Valuation
4.1 Price/Earnings Ratio
PSO is valuated rather expensively with a Price/Earnings ratio of 18.98.
Based on the Price/Earnings ratio, PSO is valued a bit cheaper than 73.61% of the companies in the same industry.
The average S&P500 Price/Earnings ratio is at 26.19. PSO is valued slightly cheaper when compared to this.
A Price/Forward Earnings ratio of 17.35 indicates a rather expensive valuation of PSO.
PSO's Price/Forward Earnings ratio is a bit cheaper when compared to the industry. PSO is cheaper than 69.44% of the companies in the same industry.
Compared to an average S&P500 Price/Forward Earnings ratio of 22.13, PSO is valued a bit cheaper.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 18.98 | ||
| Fwd PE | 17.35 |
4.2 Price Multiples
Based on the Enterprise Value to EBITDA ratio, PSO is valued a bit cheaper than the industry average as 68.06% of the companies are valued more expensively.
81.94% of the companies in the same industry are more expensive than PSO, based on the Price/Free Cash Flow ratio.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 15.71 | ||
| EV/EBITDA | 11.31 |
4.3 Compensation for Growth
The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates PSO does not grow enough to justify the current Price/Earnings ratio.
The excellent profitability rating of PSO may justify a higher PE ratio.
PEG (NY)1.99
PEG (5Y)16.48
EPS Next 2Y9.77%
EPS Next 3Y9.68%
5. Dividend
5.1 Amount
PSO has a Yearly Dividend Yield of 1.97%. Purely for dividend investing, there may be better candidates out there.
PSO's Dividend Yield is rather good when compared to the industry average which is at 4.26. PSO pays more dividend than 93.06% of the companies in the same industry.
Compared to an average S&P500 Dividend Yield of 2.40, PSO has a dividend comparable with the average S&P500 company.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 1.97% |
5.2 History
The dividend of PSO has a limited annual growth rate of 4.00%.
PSO has paid a dividend for at least 10 years, which is a reliable track record.
PSO has not decreased its dividend in the last 3 years.
Dividend Growth(5Y)4%
Div Incr Years4
Div Non Decr Years4
5.3 Sustainability
35.94% of the earnings are spent on dividend by PSO. This is a low number and sustainable payout ratio.
PSO's earnings are growing more than its dividend. This makes the dividend growth sustainable.
DP35.94%
EPS Next 2Y9.77%
EPS Next 3Y9.68%
16.13
-0.15 (-0.92%)
Chartmill FA Rating
GICS SectorConsumer Discretionary
GICS IndustryGroupConsumer Services
GICS IndustryDiversified Consumer Services
Earnings (Last)
Earnings (Next)
Inst Owners83.16%
Inst Owner Change1.78%
Ins Owners0.26%
Ins Owner ChangeN/A
Market Cap10.64B
Analysts68
Price Target18.34 (13.7%)
Short Float %0.27%
Short Ratio2.1
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 1.97% |
Yearly Dividend0.32
Dividend Growth(5Y)4%
DP35.94%
Div Incr Years4
Div Non Decr Years4
Ex-Date
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)2.09%
PT rev (3m)12.75%
EPS NQ rev (1m)N/A
EPS NQ rev (3m)N/A
EPS NY rev (1m)0.5%
EPS NY rev (3m)-3.95%
Revenue NQ rev (1m)N/A
Revenue NQ rev (3m)N/A
Revenue NY rev (1m)-1.58%
Revenue NY rev (3m)-4.66%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 18.98 | ||
| Fwd PE | 17.35 | ||
| P/S | 2.22 | ||
| P/FCF | 15.71 | ||
| P/OCF | 12.6 | ||
| P/B | 1.96 | ||
| P/tB | 7.81 | ||
| EV/EBITDA | 11.31 |
EPS(TTM)0.85
EY5.27%
EPS(NY)0.93
Fwd EY5.76%
FCF(TTM)1.03
FCFY6.36%
OCF(TTM)1.28
OCFY7.93%
SpS7.25
BVpS8.24
TBVpS2.07
PEG (NY)1.99
PEG (5Y)16.48
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 6.3% | ||
| ROE | 10.75% | ||
| ROCE | 10.09% | ||
| ROIC | 8.19% | ||
| ROICexc | 9.1% | ||
| ROICexgc | 24.03% | ||
| OM | 15.37% | ||
| PM (TTM) | 12.22% | ||
| GM | 50.99% | ||
| FCFM | 14.16% |
ROA(3y)5.07%
ROA(5y)4.41%
ROE(3y)8.59%
ROE(5y)7.58%
ROIC(3y)6.7%
ROIC(5y)5.84%
ROICexc(3y)7.48%
ROICexc(5y)7.31%
ROICexgc(3y)20.27%
ROICexgc(5y)22.68%
ROCE(3y)8.26%
ROCE(5y)7.2%
ROICexcg growth 3Y7.27%
ROICexcg growth 5Y10.63%
ROICexc growth 3Y17.53%
ROICexc growth 5Y6.81%
OM growth 3Y25.2%
OM growth 5Y6.89%
PM growth 3Y33.26%
PM growth 5Y12.36%
GM growth 3Y1.31%
GM growth 5Y-0.38%
F-Score7
Asset Turnover0.52
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.29 | ||
| Debt/FCF | 2.93 | ||
| Debt/EBITDA | 1.48 | ||
| Cap/Depr | 52.77% | ||
| Cap/Sales | 3.49% | ||
| Interest Coverage | 8.4 | ||
| Cash Conversion | 80.28% | ||
| Profit Quality | 115.9% | ||
| Current Ratio | 1.85 | ||
| Quick Ratio | 1.8 | ||
| Altman-Z | 2.83 |
F-Score7
WACC8.47%
ROIC/WACC0.97
Cap/Depr(3y)49.36%
Cap/Depr(5y)46.7%
Cap/Sales(3y)3.58%
Cap/Sales(5y)3.97%
Profit Quality(3y)103.3%
Profit Quality(5y)94.38%
High Growth Momentum
Growth
EPS 1Y (TTM)5.89%
EPS 3Y20.87%
EPS 5Y1.15%
EPS Q2Q%10.25%
EPS Next Y9.54%
EPS Next 2Y9.77%
EPS Next 3Y9.68%
EPS Next 5YN/A
Revenue 1Y (TTM)-3.32%
Revenue growth 3Y1.19%
Revenue growth 5Y-1.7%
Sales Q2Q%0.17%
Revenue Next Year1.13%
Revenue Next 2Y2.52%
Revenue Next 3Y3.2%
Revenue Next 5YN/A
EBIT growth 1Y6.43%
EBIT growth 3Y26.69%
EBIT growth 5Y5.08%
EBIT Next Year38.58%
EBIT Next 3Y15.6%
EBIT Next 5YN/A
FCF growth 1Y26.07%
FCF growth 3Y49.68%
FCF growth 5Y23.37%
OCF growth 1Y19.43%
OCF growth 3Y24.36%
OCF growth 5Y11.19%