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Pearson plc

PSONYSE
$12.65
$0.00(0.00%)
U.S. Market opens in 9h 43m

Pearson plc Fundamental Analysis

Pearson plc (PSO) shows moderate financial fundamentals with a PE ratio of 14.40, profit margin of 12.53%, and ROE of 11.56%. The company generates $3.3B in annual revenue with weak year-over-year growth of -3.32%.

Key Strengths

Current Ratio2.31

Areas of Concern

Cash Position4.04%
PEG Ratio6.15
We analyze PSO's fundamental strength across five key dimensions.

The stock receives a Fundamental Health Score of 44.9/100 based on profitability, valuation, growth, and balance sheet metrics. The D grade reflects weak fundamentals and significant financial concerns.

Fundamental Health Score

D
44.9/100

We analyze PSO's fundamental strength across five key dimensions:

Efficiency Score

Weak

PSO struggles to generate sufficient returns from assets.

ROA > 10%
7.08%

Valuation Score

Moderate

PSO shows balanced valuation metrics.

PE < 25
14.40
PEG Ratio < 2
6.15

Growth Score

Moderate

PSO shows steady but slowing expansion.

Revenue Growth > 5%
-3.32%
EPS Growth > 10%
20.75%

Financial Health Score

Excellent

PSO maintains a strong and stable balance sheet.

Debt/Equity < 1
0.42
Current Ratio > 1
2.31

Profitability Score

Weak

PSO struggles to sustain strong margins.

ROE > 15%
11.56%
Net Margin ≥ 15%
12.53%
Positive Free Cash Flow
Yes

Key Financial Metrics

Is PSO Expensive or Cheap?

P/E Ratio

PSO trades at 14.40 times earnings. This suggests potential undervaluation.

14.40

PEG Ratio

When adjusting for growth, PSO's PEG of 6.15 indicates potential overvaluation.

6.15

Price to Book

The market values Pearson plc at 1.77 times its book value. This may indicate undervaluation.

1.77

EV/EBITDA

Enterprise value stands at 4.34 times EBITDA. This is generally considered low.

4.34

How Well Does PSO Make Money?

Net Profit Margin

For every $100 in sales, Pearson plc keeps $12.53 as profit after all expenses.

12.53%

Operating Margin

Core operations generate 15.97 in profit for every $100 in revenue, before interest and taxes.

15.97%

ROE

Management delivers $11.56 in profit for every $100 of shareholder equity.

11.56%

ROA

Pearson plc generates $7.08 in profit for every $100 in assets, demonstrating efficient asset deployment.

7.08%

Following the Money - Real Cash Generation

Operating Cash Flow

Pearson plc produces operating cash flow of $701.23M, showing steady but balanced cash generation.

$701.23M

Free Cash Flow

Pearson plc generates strong free cash flow of $588.13M, providing ample flexibility for dividends, buybacks, or growth.

$588.13M

FCF Per Share

Each share generates $0.93 in free cash annually.

$0.93

FCF Yield

PSO converts 10.43% of its market value into free cash.

10.43%

Financial Ratios Analysis

Valuation Ratios

P/E Ratio

Price to earnings ratio

14.40

vs 25 benchmark

PEG Ratio

Price/earnings to growth ratio

6.15

vs 25 benchmark

P/B Ratio

Price to book value ratio

1.77

vs 25 benchmark

P/S Ratio

Price to sales ratio

1.70

vs 25 benchmark

Financial Health

Debt/Equity

Total debt to shareholders' equity

0.42

vs 25 benchmark

Current Ratio

Current assets to current liabilities

2.31

vs 25 benchmark

Efficiency Ratios

ROE

Return on equity percentage

0.12

vs 25 benchmark

ROA

Return on assets percentage

0.07

vs 25 benchmark

ROCE

Return on capital employed

0.11

vs 25 benchmark

How PSO Stacks Against Its Sector Peers

MetricPSO ValueSector AveragePerformance
P/E Ratio14.4022.05 Better (Cheaper)
ROE11.56%1173.00% Weak
Net Margin12.53%-64583.00% (disorted) Strong
Debt/Equity0.421.36 Strong (Low Leverage)
Current Ratio2.311.58 Strong Liquidity
ROA7.08%-200331.00% (disorted) Weak

PSO outperforms its industry in 4 out of 6 key metrics, particularly excelling in Net Margin, but lagging in ROE.

Historical Growth Performance

5-Year Growth Trajectory

This section reviews Pearson plc's 5-year compound annual growth rate (CAGR) and compares its performance against the typical investment style of its industry.

Revenue CAGR

5.99%

Industry Style: Growth, Technology, Streaming

Growing

EPS CAGR

89.80%

Industry Style: Growth, Technology, Streaming

High Growth

FCF CAGR

96.18%

Industry Style: Growth, Technology, Streaming

High Growth

Fundamental Analysis FAQ