One-glance verdict
Undervalued
$23.39 our estimate vs market $17.64
Wall Street consensus: $16.15 (-31.0% lower than our fair-value estimate)
25% below our estimate, below the bear case
Fundamentals snapshot
Pearson plc
PSO · NYQ · Communication Services · Publishing
Current price
$17.64
52-week range
$12.02 - $18.43
Market cap
$10.60B
Balance sheet
Watch
7.95x Adequate
Net debt $1.89B. Interest coverage shows how many times profit covers the interest bill.
What stands out
3 Rewards
2 Risks
3 rewards · 2 risks
- Reward Revenue grew 0.7% last year.
- Reward Free cash flow was positive in 4/10 years.
- Risk Net debt grew 70.8% over 3 years.
- Risk Insider ownership is only 0.1% (peer median: 7.2%).
What this company does
Pearson plc
Pearson sells educational materials and services like textbooks, online courses, and tests in countries around the world, with most of its money coming from its assessment and qualifications business (tests for schools and professions). This is important because it shows how Pearson is focused on helping people get educated and certified, which is a consistent way for them to make money over time.
How the company got here
Pearson plc has a long history, starting in 1844 as a construction business before evolving into publishing. Over the decades, it shifted its focus, acquiring various media and education companies. A significant turning point was its strategic decision to concentrate primarily on education, divesting many of its non-core assets. This transformation aimed to position Pearson as a global leader in learning, adapting to the changing educational landscape.
What it actually does
Pearson is a global company focused on education. Think of it as a provider of learning materials and services that help people learn at different stages of their lives. This includes everything from textbooks and digital learning platforms for students to professional certifications and language testing for adults. Their goal is to make learning more accessible and effective for everyone, everywhere.
Assessment & Qualifications
This part of Pearson is like the official testing center for many educational and professional milestones. They create and administer exams for things like high school diplomas (GCSEs and A-levels in the UK), university entrance, and professional certifications. They also provide the study materials, or courseware, that people use to prepare for these tests. This segment is a significant part of Pearson's business, covering a wide range of academic and professional assessments globally.
Virtual Learning
Imagine schools that exist entirely online. That's what this segment offers. Pearson provides the technology and services for virtual schools and manages online programs for other educational institutions. This means they help set up and run online learning environments, making education available to students who may not be able to attend traditional brick-and-mortar schools. This is a growing area as online education becomes more popular.
English Language Learning
This segment focuses specifically on helping people learn and prove their proficiency in English. They offer resources like textbooks and online tools for English language learners, as well as the well-known Pearson Test of English (PTE) academic exam, which is used by universities and governments worldwide. This business caters to a massive global market of individuals and institutions needing English language education and certification.
Enterprise Learning & Skills
This part of Pearson works with businesses and organizations to help their employees learn and develop new skills. They offer vocational training, which are practical skills for specific jobs, and also provide digital credentials through platforms like Credly, which allows individuals to showcase their acquired skills. This segment helps companies upskill their workforce and ensures individuals have recognized qualifications for their expertise.
Higher Education
This segment is dedicated to supporting students and instructors in universities and colleges, primarily in the US, Canada, and internationally. Pearson provides courseware, which includes textbooks and digital learning materials, designed for higher education curricula. They aim to enhance the learning experience for college students and provide valuable resources for professors.
What management is betting on now
Pearson's current strategy revolves around becoming a more focused and efficient digital learning company. They are investing heavily in their online offerings and technology to provide more personalized and adaptive learning experiences. The goal is to shift revenue towards higher-margin digital products and services, making learning more accessible and effective for a global audience. This includes expanding their reach in areas like English language learning and professional assessments.
Price history
How the share price has moved
—
Loading price history…
Is it cheap or expensive?
Fair value $23.39 vs current price $17.64
Wall Street consensus is the average analyst price target: $16.15 (-31.0% lower than our fair-value estimate).
Our most-likely fair value is $23.39 a share — about 32.6% above today's price of $17.64, so the stock currently looks cheap (undervalued).
Is it drowning in debt?
Watch
Net debt $1.9B. Interest coverage 7.9x.
Net debt
$1.89B
Interest coverage
7.95x
Pearson plc's profit covers its interest bill about 7.9 times over. which is stronger than most peers shown here.
Watch
Worse cushion
Baseline
Better cushion
PSO
BASELINE
Pearson plc
Total debt $2.34B Interest coverage 7.95x This is the baseline the peer rows are being compared against.
Total debt $86.14M Interest coverage 3.00x -62% vs PSO Carries about 2.7x less debt cushion than PSO.
Total debt $733.99M Interest coverage 40.44x +409% vs PSO Carries about 5.1x more debt cushion than PSO.
Total debt $1.46B Interest coverage 2.08x -74% vs PSO Carries about 3.8x less debt cushion than PSO.
Total debt $619.04M Interest coverage 38.27x +382% vs PSO Carries about 4.8x more debt cushion than PSO.
Total debt $1.38B Interest coverage 6.75x -15% vs PSO Carries about 1.2x less debt cushion than PSO.
What you should know
The case for and against PSO
3 Rewards
2 Risks
Rewards
-
Revenue grew 0.7% last year.
-
Free cash flow was positive in 4/10 years.
-
Dividend yield is 1.9% with 26-year payout history.
Risks
-
Net debt grew 70.8% over 3 years.
-
Insider ownership is only 0.1% (peer median: 7.2%).
The numbers
All the key metrics, grouped by purpose
Tap any ? icon to learn what it means.
Valuation
How expensive the stock looks
P/E (TTM)
26.33x
Forward P/E
18.16x
P/B
2.43x
P/S
2.92x
EV/EBITDA
20.38x
PEG ratio
1.94x
Profitability
How much profit each dollar creates
Gross margin
52.0%
Operating margin
13.3%
Net margin
8.8%
ROE
9.2%
ROA
5.1%
Health
Liquidity and balance-sheet strength
Debt / equity
0.52x
Current ratio
2.00x
Quick ratio
1.20x
Total debt
$2.34B
Total cash
$451.03M
Growth
How the business has been compounding
Revenue TTM
$4.83B
Revenue 5Y CAGR
-2.3%
EPS TTM
0.67
EPS 5Y CAGR
15.9%
Cash flow
How much cash the business throws off
Operating CF TTM
$872.79M
Free CF TTM
$694.51M
FCF margin
14.4%
Dividend
Shareholder payout
Yield
1.9%
Payout ratio
51.1%
Last ex-div date
2026-08-14