PEARSON PLC-SPONSORED ADR (PSO) Stock Fundamental Analysis
NYSE:PSO - New York Stock Exchange, Inc. - US7050151056 - ADR - Currency: USD
PSO gets a fundamental rating of 6 out of 10. The analysis compared the fundamentals against 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 is not valued too expensively and it also shows a decent growth rate.
1. Profitability
1.1 Basic Checks
PSO had positive earnings in the past year.
In the past year PSO had a positive cash flow from operations.
In the past 5 years PSO has always been profitable.
In the past 5 years PSO always reported a positive cash flow from operatings.
1.2 Ratios
With a decent Return On Assets value of 6.30%, PSO is doing good in the industry, outperforming 70.83% of the companies in the same industry.
PSO's Return On Equity of 10.75% is fine compared to the rest of the industry. PSO outperforms 69.44% of its industry peers.
With an excellent Return On Invested Capital value of 8.19%, PSO belongs to the best of the industry, outperforming 81.94% of the companies in the same industry.
Measured over the past 3 years, the Average Return On Invested Capital for PSO is below the industry average of 10.64%.
The 3 year average ROIC (6.70%) for PSO is below the current ROIC(8.19%), indicating increased profibility in the last year.
| 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
With a decent Profit Margin value of 12.22%, PSO is doing good in the industry, outperforming 76.39% of the companies in the same industry.
PSO's Profit Margin has improved in the last couple of years.
PSO has a Operating Margin of 15.37%. This is in the better half of the industry: PSO outperforms 77.78% of its industry peers.
PSO's Operating Margin has improved in the last couple of years.
The Gross Margin of PSO (50.99%) is comparable to the rest of the 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
The Return on Invested Capital (ROIC) is below the Cost of Capital (WACC), so PSO is destroying value.
Compared to 1 year ago, PSO has less shares outstanding
The number of shares outstanding for PSO has been reduced compared to 5 years ago.
PSO has a worse debt/assets ratio than last year.
2.2 Solvency
PSO has an Altman-Z score of 2.63. 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.
With a decent Altman-Z score value of 2.63, PSO is doing good in the industry, outperforming 65.28% 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.
With a decent Debt to FCF ratio value of 2.93, PSO is doing good in the industry, outperforming 73.61% of the companies in the same industry.
A Debt/Equity ratio of 0.29 indicates that PSO is not too dependend on debt financing.
PSO has a Debt to Equity ratio of 0.29. This is comparable to the rest of the industry: PSO outperforms 51.39% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.29 | ||
| Debt/FCF | 2.93 | ||
| Altman-Z | 2.63 |
ROIC/WACC0.74
WACC11.11%
2.3 Liquidity
PSO has a Current Ratio of 1.85. 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 better Current ratio (1.85) than 72.22% of its industry peers.
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.
PSO has a Quick ratio of 1.80. This is in the better half of the industry: PSO outperforms 72.22% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.85 | ||
| Quick Ratio | 1.8 |
3. Growth
3.1 Past
The Earnings Per Share has been growing slightly by 5.89% over the past year.
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.
PSO shows a decrease in Revenue. Measured over the last years, the Revenue has been decreasing by -1.70% yearly.
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
Based on estimates for the next years, PSO will show a quite strong growth in Earnings Per Share. The EPS will grow by 9.68% on average per year.
PSO is expected to show a small growth in Revenue. In the coming years, the Revenue will grow by 3.20% yearly.
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.
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.
4. Valuation
4.1 Price/Earnings Ratio
A Price/Earnings ratio of 16.49 indicates a correct valuation of PSO.
Based on the Price/Earnings ratio, PSO is valued a bit cheaper than the industry average as 77.78% of the companies are valued more expensively.
Compared to an average S&P500 Price/Earnings ratio of 27.19, PSO is valued a bit cheaper.
The Price/Forward Earnings ratio is 15.07, which indicates a correct valuation of PSO.
Based on the Price/Forward Earnings ratio, PSO is valued a bit cheaper than 75.00% of the companies in the same industry.
PSO is valuated cheaply when we compare the Price/Forward Earnings ratio to 35.33, which is the current average of the S&P500 Index.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 16.49 | ||
| Fwd PE | 15.07 |
4.2 Price Multiples
Based on the Enterprise Value to EBITDA ratio, PSO is valued a bit cheaper than 70.83% of the companies in the same industry.
Compared to the rest of the industry, the Price/Free Cash Flow ratio of PSO indicates a rather cheap valuation: PSO is cheaper than 84.72% of the companies listed in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 13.64 | ||
| EV/EBITDA | 10.06 |
4.3 Compensation for Growth
The PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a correct valuation of the company.
PSO has a very decent profitability rating, which may justify a higher PE ratio.
PEG (NY)1.73
PEG (5Y)14.32
EPS Next 2Y9.77%
EPS Next 3Y9.68%
5. Dividend
5.1 Amount
PSO has a Yearly Dividend Yield of 2.27%.
Compared to an average industry Dividend Yield of 3.87, PSO pays a better dividend. On top of this PSO pays more dividend than 93.06% of the companies listed in the same industry.
Compared to an average S&P500 Dividend Yield of 2.35, PSO has a dividend comparable with the average S&P500 company.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.27% |
5.2 History
The dividend of PSO has a limited annual growth rate of 4.00%.
PSO has been paying a dividend for at least 10 years, so it has a reliable track record.
PSO has decreased its dividend in the last 3 years.
Dividend Growth(5Y)4%
Div Incr Years2
Div Non Decr Years2
5.3 Sustainability
PSO pays out 35.94% of its income as dividend. This is a sustainable payout ratio.
The dividend of PSO is growing, but earnings are growing more, so the dividend growth is sustainable.
DP35.94%
EPS Next 2Y9.77%
EPS Next 3Y9.68%
14.18
-0.14 (-0.98%)
Chartmill FA Rating
GICS SectorConsumer Discretionary
GICS IndustryGroupConsumer Services
GICS IndustryDiversified Consumer Services
Earnings (Last)
Earnings (Next)
Inst Owners76.58%
Inst Owner Change0%
Ins Owners0.19%
Ins Owner ChangeN/A
Market Cap9.26B
Analysts67.14
Price Target17.77 (25.32%)
Short Float %0.14%
Short Ratio1.3
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.27% |
Yearly Dividend0.32
Dividend Growth(5Y)4%
DP35.94%
Div Incr Years2
Div Non Decr Years2
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)-1.14%
PT rev (3m)-1.06%
EPS NQ rev (1m)N/A
EPS NQ rev (3m)N/A
EPS NY rev (1m)0.62%
EPS NY rev (3m)-0.17%
Revenue NQ rev (1m)N/A
Revenue NQ rev (3m)N/A
Revenue NY rev (1m)0%
Revenue NY rev (3m)-3.94%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 16.49 | ||
| Fwd PE | 15.07 | ||
| P/S | 1.93 | ||
| P/FCF | 13.64 | ||
| P/OCF | 10.95 | ||
| P/B | 1.7 | ||
| P/tB | 6.78 | ||
| EV/EBITDA | 10.06 |
EPS(TTM)0.86
EY6.06%
EPS(NY)0.94
Fwd EY6.64%
FCF(TTM)1.04
FCFY7.33%
OCF(TTM)1.3
OCFY9.14%
SpS7.34
BVpS8.34
TBVpS2.09
PEG (NY)1.73
PEG (5Y)14.32
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 | 2.63 |
F-Score7
WACC11.11%
ROIC/WACC0.74
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%