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 73 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 correct valuation and a medium growth rate.
1. Profitability
1.1 Basic Checks
In the past year PSO was profitable.
In the past year PSO had a positive cash flow from operations.
PSO had positive earnings in each of the past 5 years.
In the past 5 years PSO always reported a positive cash flow from operatings.
1.2 Ratios
The Return On Assets of PSO (6.30%) is better than 76.71% of its industry peers.
The Return On Equity of PSO (10.75%) is better than 71.23% of its industry peers.
The Return On Invested Capital of PSO (8.19%) is better than 80.82% of its industry peers.
PSO had an Average Return On Invested Capital over the past 3 years of 6.70%. This is significantly below the industry average of 11.99%.
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
The Profit Margin of PSO (12.22%) is better than 83.56% of its industry peers.
PSO's Profit Margin has improved in the last couple of years.
PSO has a Operating Margin of 15.37%. This is amongst the best in the industry. PSO outperforms 82.19% of its industry peers.
PSO's Operating Margin has improved in the last couple of years.
PSO has a Gross Margin (50.99%) which 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
PSO has a Return on Invested Capital (ROIC), which is below the Cost of Capital (WACC), which means it is destroying value.
PSO has less shares outstanding than it did 1 year ago.
Compared to 5 years ago, PSO has less shares outstanding
PSO has a worse debt/assets ratio than last year.
2.2 Solvency
PSO has an Altman-Z score of 2.85. 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.
PSO has a better Altman-Z score (2.85) than 72.60% of its industry peers.
The Debt to FCF ratio of PSO is 2.93, which is a good value as it means it would take PSO, 2.93 years of fcf income to pay off all of its debts.
PSO has a better Debt to FCF ratio (2.93) than 78.08% of its industry peers.
PSO has a Debt/Equity ratio of 0.29. This is a healthy value indicating a solid balance between debt and equity.
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 | 2.85 |
ROIC/WACC0.96
WACC8.54%
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.
The Current ratio of PSO (1.85) is better than 71.23% 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's Quick ratio of 1.80 is fine compared to the rest of the industry. PSO outperforms 72.60% of its industry peers.
| 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%.
Measured over the past 5 years, PSO shows a small growth in Earnings Per Share. The EPS has been growing by 1.15% on average per year.
The Revenue has decreased by -3.32% in the past year.
Measured over the past years, PSO shows a decrease in Revenue. The Revenue has been decreasing by -1.70% on average per year.
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
The Earnings Per Share is expected to grow by 9.68% on average over the next years. This is quite good.
The Revenue is expected to grow by 3.65% on average over the next years.
EPS Next Y9.54%
EPS Next 2Y9.77%
EPS Next 3Y9.68%
EPS Next 5YN/A
Revenue Next Year2.75%
Revenue Next 2Y3.44%
Revenue Next 3Y3.65%
Revenue Next 5YN/A
3.3 Evolution
When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is accelerating.
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
With a Price/Earnings ratio of 19.07, PSO is valued on the expensive side.
72.60% of the companies in the same industry are more expensive than PSO, based on the Price/Earnings ratio.
When comparing the Price/Earnings ratio of PSO to the average of the S&P500 Index (28.18), we can say PSO is valued slightly cheaper.
The Price/Forward Earnings ratio is 17.50, which indicates a rather expensive current valuation of PSO.
PSO's Price/Forward Earnings ratio is a bit cheaper when compared to the industry. PSO is cheaper than 68.49% of the companies in the same industry.
When comparing the Price/Forward Earnings ratio of PSO to the average of the S&P500 Index (20.81), we can say PSO is valued inline with the index average.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 19.07 | ||
| Fwd PE | 17.5 |
4.2 Price Multiples
71.23% of the companies in the same industry are more expensive than PSO, based on the Enterprise Value to EBITDA ratio.
Based on the Price/Free Cash Flow ratio, PSO is valued cheaper than 84.93% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 15.85 | ||
| EV/EBITDA | 11.4 |
4.3 Compensation for Growth
The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates an expensive valuation of the company.
PSO has an outstanding profitability rating, which may justify a higher PE ratio.
PEG (NY)2
PEG (5Y)16.56
EPS Next 2Y9.77%
EPS Next 3Y9.68%
5. Dividend
5.1 Amount
With a Yearly Dividend Yield of 2.03%, PSO has a reasonable but not impressive dividend return.
PSO's Dividend Yield is rather good when compared to the industry average which is at 4.77. PSO pays more dividend than 91.78% of the companies in the same industry.
PSO's Dividend Yield is comparable with the S&P500 average which is at 2.45.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.03% |
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
PSO pays out 35.94% of its income as dividend. This is a 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%
16.02
+0.11 (+0.69%)
Chartmill FA Rating
GICS SectorConsumer Discretionary
GICS IndustryGroupConsumer Services
GICS IndustryDiversified Consumer Services
Earnings (Last)
Earnings (Next)
Inst Owners83.16%
Inst Owner Change2.7%
Ins Owners0.26%
Ins Owner ChangeN/A
Market Cap10.60B
Analysts68
Price Target18.34 (14.48%)
Short Float %0.3%
Short Ratio2.55
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.03% |
Yearly Dividend0.31
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)0.62%
PT rev (3m)12.75%
EPS NQ rev (1m)N/A
EPS NQ rev (3m)N/A
EPS NY rev (1m)-1.46%
EPS NY rev (3m)-4.19%
Revenue NQ rev (1m)N/A
Revenue NQ rev (3m)N/A
Revenue NY rev (1m)-2.4%
Revenue NY rev (3m)-2.86%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 19.07 | ||
| Fwd PE | 17.5 | ||
| P/S | 2.24 | ||
| P/FCF | 15.85 | ||
| P/OCF | 12.71 | ||
| P/B | 1.97 | ||
| P/tB | 7.88 | ||
| EV/EBITDA | 11.4 |
EPS(TTM)0.84
EY5.24%
EPS(NY)0.92
Fwd EY5.71%
FCF(TTM)1.01
FCFY6.31%
OCF(TTM)1.26
OCFY7.87%
SpS7.14
BVpS8.12
TBVpS2.03
PEG (NY)2
PEG (5Y)16.56
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 | 2.85 |
F-Score7
WACC8.54%
ROIC/WACC0.96
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 Year2.75%
Revenue Next 2Y3.44%
Revenue Next 3Y3.65%
Revenue Next 5YN/A
EBIT growth 1Y6.43%
EBIT growth 3Y26.69%
EBIT growth 5Y5.08%
EBIT Next Year42.4%
EBIT Next 3Y16.8%
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%