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1. Company Snapshot

1.a. Company Description

Pearson plc provides educational courseware, assessments, and services in the United Kingdom, the United States, Canada, the Asia Pacific, other European countries, and internationally.It operates through five segments: Assessment & Qualifications, Virtual Learning, English Language Learning, Higher Education, and Workforce Skills.The Assessment & Qualifications segment offers Pearson VUE, US student assessment, clinical assessment, UK GCSE, and A levels and international academic qualifications.


The Virtual Learning segment provides virtual schools and online program management services.The English Language Learning segment offers Pearson test of English, institutional courseware, and English online solutions.The Higher Education segment provides the US, Canadian, and international higher education courseware businesses.


The Workforce Skills offers BTEC, GED, TalentLens, Faethm, Pearson college, and apprenticeships.Pearson plc was founded in 1844 and is headquartered in London, the United Kingdom.

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1.b. Last Insights on PSON

Pearson's recent performance has been impacted by a decline in revenue, down 1.8% to UK£1.72b in the first half of 2025, despite a 2% sales increase driven by new partnerships and AI advancements. The company's English language assessment segment faced pressures in language learning and FX headwinds. However, Pearson's acquisition of eDynamic Holdings, a Career and Technical Education curriculum solutions provider, aligns with its strategy to scale its position in the fast-growing Early Careers space. Additionally, the company has announced a dividend of £0.078.

1.c. Company Highlights

2. Pearson Navigates Market Headwinds with Strong Operational Performance

Pearson delivered a solid first-half performance, with 2% underlying sales growth and a 2% increase in adjusted operating profit to GBP 242 million. Adjusted earnings per share were down to 24.5p due to FX headwinds. The company's balance sheet remains strong, driven by good cash flow, allowing for continued investment in the business, including the $225 million acquisition of eDynamic Learning, a leader in career and technical education, and a GBP 350 million share buyback program expected to complete in the second half.

Publication Date: Aug -13

📋 Highlights
  • Sales Growth: 2% underlying sales increase in H1 2025, driven by Assessments & Qualifications (+2%), Higher Education (+4%), and Enterprise Learning & Skills (+4%).
  • Adjusted Operating Profit: Rose 2% to GBP 242 million, supported by operating leverage, despite inflationary pressures and margin variations across units.
  • Share Buybacks & Acquisitions: GBP 350 million share buyback program and $225 million acquisition of eDynamic Learning to boost Early Careers and CTE offerings.
  • Dividend Increase: Proposed 5% rise in interim dividend to 7.8p, reflecting strong cash flow (GBP 156 million free cash flow) and shareholder returns.
  • Full-Year Outlook: Confirmed guidance with 7% growth potential in H2 2025, fueled by VUE contract resumption, Virtual Schools enrollment, and Clinical Assessment product launches.

Revenue Breakdown by Segment

Pearson reported a 2% sales increase in the first half of 2025, driven by growth in Assessments & Qualifications, Higher Education, and Enterprise Learning & Skills, partially offset by declines in Virtual School and English Language Learning. Assessments & Qualifications saw 2% growth, propelled by strong performance in Clinical Assessments and the UK & International Qualifications, while VUE experienced a decline due to a paused contract and headwinds in PDRI. Virtual School sales decreased 1% as anticipated, due to the impact of previous school losses. Higher Education grew 4% with 21% growth in Institutional and 3% growth in U.S. digital subscriptions. English Language Learning declined 3%, in line with expectations, with the Institutional business impacted by a strong performance in the first half of 2024. Enterprise Learning & Skills grew 4% with strong performance from Vocational Qualifications and Enterprise Solutions.

Looking Ahead to Second-Half Growth

The company anticipates a 7% potential growth rate in the second half of 2025, with VUE, Virtual Schools, and English Language Learning experiencing a significant growth push. Key drivers include the launch of new VUE contracts, the resumption of a previously paused contract, and enrollment growth in Virtual Schools.

Financial Metrics & Valuation

With an adjusted operating profit margin of 19%, Pearson demonstrated strong operational leverage. Free cash flow rose to GBP 156 million, driven by strong operating cash flow and good working capital management. The company's P/E ratio of 16.28 suggests the market expects continued earnings growth, while its P/S ratio of 2.04 indicates a premium valuation compared to its revenue growth rate. The 12.26% Free Cash Flow Yield signals attractive cash returns for investors.

3. NewsRoom

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How Recent Developments Are Shaping the Pearson Investment Story

Nov -29

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Pearson Launches AI-Powered Communication Coach to Transform Everyday Work into Continuous Learning

Nov -18

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Why The Narrative Around Pearson Is Shifting Amid Analyst Revisions And New Developments

Nov -15

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Pearson’s Energy-Sector Push Adds Workforce Edge to Virtual Schooling

Nov -13

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Estimating The Intrinsic Value Of Pearson plc (LON:PSON)

Oct -30

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Pearson (PSO) Reports Solid Q3; JPMorgan Lifts Price Target to 1,330 GBp

Oct -30

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Fubo, Disney’s Hulu + Live TV Complete Business Combination, Creating Unique Consumer Focused vMVPD

Oct -29

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Cognizant to Report Q3 Earnings: What's in Store for the Stock?

Oct -27

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (9.64%)

6. Segments

Assessment & Qualifications

Expected Growth: 8.2%

Pearson plc's 8.2% growth in Assessment & Qualifications is driven by increasing demand for digital assessments, expansion in emerging markets, and a growing need for workforce skills development. Additionally, the segment benefits from a strong brand reputation, strategic partnerships, and a shift towards online proctoring and AI-powered testing solutions.

Higher Education

Expected Growth: 9.33%

Pearson plc's Higher Education segment growth of 9.33% is driven by increasing demand for online and blended learning, expansion in emerging markets, and strategic partnerships with universities. Additionally, the shift towards digital content and adaptive learning solutions, as well as the company's efforts to improve affordability and accessibility, contribute to this growth.

Virtual Learning

Expected Growth: 11.67%

Pearson plc's 11.67% growth in Virtual Learning is driven by increasing demand for online education, advancements in digital learning platforms, and strategic partnerships with educational institutions. Additionally, the shift towards personalized and adaptive learning, as well as the need for continuous skill development in a rapidly changing job market, contribute to the segment's growth.

English Language Learning

Expected Growth: 12.57%

Pearson plc's English Language Learning segment growth of 12.57% is driven by increasing global demand for online learning, expansion in emerging markets, and strategic partnerships. Additionally, the shift towards digital learning, growing need for English language proficiency, and Pearson's strong brand recognition contribute to this growth.

Workforce Skills

Expected Growth: 9.82%

Pearson plc's 9.82% growth in Workforce Skills is driven by increasing demand for digital skills training, government initiatives for workforce development, and growing adoption of online learning platforms. Additionally, Pearson's strategic partnerships and expansion into emerging markets have contributed to this growth.

Strategic Review

Expected Growth: 9.03%

Pearson plc's 9.03% growth is driven by strategic review initiatives, focusing on digital transformation, cost savings, and portfolio optimization. Key drivers include expansion in online learning, growth in assessment and qualifications, and increased demand for English language learning. Additionally, the company's shift towards a more agile and efficient operating model has contributed to improved profitability.

7. Detailed Products

Assessments

Pearson's assessments provide educators with the tools to measure student progress, identify knowledge gaps, and inform instruction.

Courseware

Pearson's courseware provides interactive and engaging learning experiences for students, including online homework, tutorials, and quizzes.

Digital Learning Platforms

Pearson's digital learning platforms provide a comprehensive online learning environment for students, including online textbooks, multimedia content, and collaboration tools.

English Language Learning

Pearson's English language learning solutions provide instructional materials, online resources, and assessments to help learners develop English language skills.

Higher Education Services

Pearson's higher education services provide institutions with consulting, technology, and outsourcing services to improve student outcomes and operational efficiency.

K-12 Curriculum

Pearson's K-12 curriculum solutions provide instructional materials, online resources, and assessments for math, science, language arts, and social studies.

Professional Certification

Pearson's professional certification solutions provide testing and assessment services for professional certifications, such as IT, healthcare, and finance.

Tutoring and Test Prep

Pearson's tutoring and test prep services provide personalized learning support and test preparation for students, including SAT, ACT, and GED prep.

Vocational and Career Training

Pearson's vocational and career training solutions provide instructional materials, online resources, and assessments for career and technical education.

8. Pearson plc's Porter Forces

Forces Ranking

Threat Of Substitutes

Pearson plc operates in the education industry, where there are limited substitutes for its products and services. However, the rise of online learning platforms and digital resources poses a moderate threat of substitutes.

Bargaining Power Of Customers

Pearson plc's customers, primarily educational institutions and students, have limited bargaining power due to the company's strong brand reputation and diversified product offerings.

Bargaining Power Of Suppliers

Pearson plc has a diversified supply chain, and its suppliers have limited bargaining power due to the company's large scale and global presence.

Threat Of New Entrants

The education industry has high barriers to entry, including significant capital requirements and regulatory hurdles, making it difficult for new entrants to compete with Pearson plc.

Intensity Of Rivalry

The education industry is highly competitive, with several established players, including McGraw-Hill, Houghton Mifflin Harcourt, and Wiley, competing with Pearson plc for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 14.57%
Debt Cost 5.55%
Equity Weight 85.43%
Equity Cost 5.55%
WACC 5.55%
Leverage 17.06%

11. Quality Control: Pearson plc passed 7 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
RCS MediaGroup

A-Score: 7.5/10

Value: 8.5

Growth: 3.7

Quality: 6.9

Yield: 9.4

Momentum: 8.5

Volatility: 8.0

1-Year Total Return ->

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Stock-Card
Telenor

A-Score: 6.9/10

Value: 4.8

Growth: 3.3

Quality: 5.7

Yield: 8.8

Momentum: 9.0

Volatility: 10.0

1-Year Total Return ->

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Stock-Card
Orange Polska

A-Score: 6.5/10

Value: 7.3

Growth: 4.1

Quality: 4.5

Yield: 8.1

Momentum: 7.0

Volatility: 8.0

1-Year Total Return ->

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Stock-Card
Pearson

A-Score: 6.2/10

Value: 6.4

Growth: 5.1

Quality: 7.2

Yield: 4.4

Momentum: 5.5

Volatility: 8.7

1-Year Total Return ->

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Stock-Card
Informa

A-Score: 5.1/10

Value: 2.4

Growth: 6.2

Quality: 4.2

Yield: 2.5

Momentum: 6.5

Volatility: 9.0

1-Year Total Return ->

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Stock-Card
Schibsted

A-Score: 4.3/10

Value: 4.1

Growth: 3.0

Quality: 7.3

Yield: 1.9

Momentum: 5.5

Volatility: 4.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

9.92$

Current Price

9.92$

Potential

-0.00%

Expected Cash-Flows