Pearson Valuation

Q: What is the Fair Price of PSO when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

PSO ($15.36) is trading below our estimate of [[fair value]] ($19.01)

Is PSO undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

2/6

Valuation Score 2/6

Below Fair Value
Significantly Below Fair Value
Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Analyst Forecast

Share Price vs Fair Value

What is the Fair Price of PSO when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: PSO ($15.36) is trading below our estimate of fair value ($19.01)

Significantly Below Fair Value: PSO is trading below fair value, but not by a significant amount.

Key Valuation Metric

Which metric is best to use when looking at relative valuation for PSO?

Key metric: As PSO is profitable we use its Price-To-Earnings Ratio for relative valuation analysis.

The above table shows the Price to Earnings ratio for PSO. This is calculated by dividing PSO's market cap by their current earnings.
What is PSO's PE Ratio?
PE Ratio	23.4x
Earnings	UK£349.00m
Market Cap	UK£8.15b

PSO key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	2.7x
Enterprise Value/EBITDA	15.3x
PEG Ratio	2.2x

Price to Earnings Ratio vs Peers

How does PSO's PE Ratio compare to its peers?

The above table shows the PE ratio for PSO vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	Forward PE	Estimated Growth	Market Cap
Peer Average	30.1x
EDU New Oriental Education & Technology Group	24.1x	20.7%	US$9.4b
BFAM Bright Horizons Family Solutions	56.4x	33.4%	US$6.5b
LOPE Grand Canyon Education	21.3x	6.4%	US$4.7b
LRN Stride	18.5x	14.6%	US$4.4b
PSO Pearson	23.4x	10.6%	US$8.2b

Price-To-Earnings vs Peers: PSO is good value based on its Price-To-Earnings Ratio (23.4x) compared to the peer average (30.1x).

Price to Earnings Ratio vs Industry

How does PSO's PE Ratio compare vs other companies in the US Consumer Services Industry?

6 Companies	Price / Earnings	Estimated Growth	Market Cap
QSG QuantaSing Group	2.7x	-21.4%	US$143.12m
STG Sunlands Technology Group	1.3x	n/a	US$90.37m
RGS Regis	0.6x	n/a	US$48.87m
REDU RISE Education Cayman	1x	n/a	US$40.41m

6 Companies		Estimated Growth	Market Cap

No more companies

Price-To-Earnings vs Industry: PSO is expensive based on its Price-To-Earnings Ratio (23.4x) compared to the US Consumer Services industry average (19x).

Price to Earnings Ratio vs Fair Ratio

What is PSO's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

PSO PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	23.4x
Fair PE Ratio	23.3x

Price-To-Earnings vs Fair Ratio: PSO is expensive based on its Price-To-Earnings Ratio (23.4x) compared to the estimated Fair Price-To-Earnings Ratio (23.3x).

Analyst Price Targets

What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?

Analyst Forecast: Insufficient data to show price forecast.