Value
5.4/10data confidence 83%| Component | Sub-score |
|---|---|
| P/E | 5.0 |
| P/S | 8.4 |
| EV/EBITDA | 0.0 |
| Fwd P/E | 7.7 |
| PEG | 4.3 |
- ▸Forward P/E: 15.9x
- ▸PEG: 2.18
PSO · Why this verdict
Why Pearson (PSO) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score4.7/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Pearson converts free cash flow at 258% of reported net income and carries a Piotroski F-Score of 8/9, indicating broad financial health across profitability, leverage, and operational efficiency dimensions despite a publishing business model under secular pressure. Quality breakdown | Free cash flow conversion remains above 150% of net income over the next annual period, confirming the structural cash generation quality is maintained. | →Stable |
| CounterFCF well above net income in publishing may reflect amortization of large pre-existing content libraries rather than superior ongoing cash generation, and could normalize as the library ages. | ||
At $15.25, Pearson has surpassed its analyst target by approximately 20.9% with only $0.08 of upside remaining to the take-profit level of $15.33, making the risk-reward ratio of 0.12 deeply unfavorable for new positions. Warnings | Analyst consensus price target rises above $18 within 12 months, restoring at least 18% upside from current levels and enabling a constructive entry setup. | →Stable |
| CounterPublishing conglomerates with stable cash generation and dividend yields can trade above near-term analyst targets for extended periods if income-oriented investors maintain demand. | ||
Volume is distributing (falling on-balance volume), the momentum score is only 4.1, below the 4.5 minimum gate threshold, and the stock is above its 200-day moving average but with no MACD conviction, suggesting the price has run ahead of underlying buying demand. Momentum breakdown | On-balance volume trend reverses and begins rising within 60 days, indicating that renewed buying demand is supporting the current price level. | →Stable |
| CounterSoft momentum and volume distribution in a mature publishing stock can persist for long periods without triggering a price decline, as institutional holders may simply hold rather than sell. | ||
Revenue growth of approximately 3.3% and a near-zero earnings growth contribution indicate that Pearson's publishing business is growing very slowly, and the elevated put-to-call ratio of 1.50 suggests some investors are hedging against continued secular pressure on print and traditional education media. Growth breakdown | Revenue growth accelerates above 5% annually within 2 fiscal years as digital education platforms contribute a growing share of revenue. | →Stable |
| Counter3% revenue growth in publishing is actually above-trend for the industry, and digital transformation investments may take several years to show up in reported growth rates. | ||
Pearson converts free cash flow at 258% of reported net income and carries a Piotroski F-Score of 8/9, indicating broad financial health across profitability, leverage, and operational efficiency dimensions despite a publishing business model under secular pressure.
→StableQuality breakdown
- Expectation
- Free cash flow conversion remains above 150% of net income over the next annual period, confirming the structural cash generation quality is maintained.
CounterFCF well above net income in publishing may reflect amortization of large pre-existing content libraries rather than superior ongoing cash generation, and could normalize as the library ages.
At $15.25, Pearson has surpassed its analyst target by approximately 20.9% with only $0.08 of upside remaining to the take-profit level of $15.33, making the risk-reward ratio of 0.12 deeply unfavorable for new positions.
→StableWarnings
- Expectation
- Analyst consensus price target rises above $18 within 12 months, restoring at least 18% upside from current levels and enabling a constructive entry setup.
CounterPublishing conglomerates with stable cash generation and dividend yields can trade above near-term analyst targets for extended periods if income-oriented investors maintain demand.
Volume is distributing (falling on-balance volume), the momentum score is only 4.1, below the 4.5 minimum gate threshold, and the stock is above its 200-day moving average but with no MACD conviction, suggesting the price has run ahead of underlying buying demand.
→StableMomentum breakdown
- Expectation
- On-balance volume trend reverses and begins rising within 60 days, indicating that renewed buying demand is supporting the current price level.
CounterSoft momentum and volume distribution in a mature publishing stock can persist for long periods without triggering a price decline, as institutional holders may simply hold rather than sell.
Revenue growth of approximately 3.3% and a near-zero earnings growth contribution indicate that Pearson's publishing business is growing very slowly, and the elevated put-to-call ratio of 1.50 suggests some investors are hedging against continued secular pressure on print and traditional education media.
→StableGrowth breakdown
- Expectation
- Revenue growth accelerates above 5% annually within 2 fiscal years as digital education platforms contribute a growing share of revenue.
Counter3% revenue growth in publishing is actually above-trend for the industry, and digital transformation investments may take several years to show up in reported growth rates.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Pearson plc converts free cash flow at 258% of net income and holds a Piotroski F-Score of 8/9, reflecting high underlying cash generation quality, but the stock has exceeded analyst targets by nearly 21%, momentum is soft with only 4.1 momentum score, and revenue growth is flat at best.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
6.1/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 2.9 |
| ROA | 3.2 |
| Gross margin | 6.4 |
| Op margin | 5.6 |
| Net margin | 4.7 |
| Current ratio | 7.0 |
| FCF quality | 10.0 |
| Moat | 6.0 |
| Piotroski F | 8.9 |
- ▸Excellent cash conversion: 258% FCF/NI
- ▸Strong Piotroski F-Score: 8/9
Growth
1.6/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 3.3 |
| EPS growth | 0.0 |
Momentum
7.2/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 4.1 |
| MACD | 9.2 |
| OBV | 10.0 |
| MA position | 9.0 |
| Volume | 3.8 |
- ▸Overbought (RSI 77)
- ▸Volume accumulation (rising OBV)
- ▸Above 200-day MA
Sentiment
4.3/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 2.9 |
| erm sentiment | 4.8 |
- ▸Below analyst target
Insider
5.0/10data confidence 50%Peer rank
4.2/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 2.5 |
| quality rank | 2.5 |
| growth rank | 6.7 |
Technical
3.4/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 0.0 |
| support resistance | 0.2 |
| 52w position | 10.0 |
Risk (lower is worse)
7.5/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 9.6 |
| days to cover | 5.7 |
| volatility | 8.1 |
| put call | 10.0 |
| max pain risk | 3.0 |
| debt equity | 8.4 |
- ▸Above max pain $2
Catalyst
3.0/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 0.0 |
| earnings timing | 5.0 |
| surprise avg | 0.0 |
| dividend safety | 4.8 |
- ▸Yield trap warning: high yield but unsafe
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (7)
- MOMENTUM:7.2>=5.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:26d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-2.4=NEGATIVE
Warning (0)
none
Reward-to-Risk
-2.42
Upside
-27.8%
Downside
11.5%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 4.7 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Risk (lower is worse) at 7.5) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:-2.4=NEGATIVE) reinforce the read. Current asymmetry R:R is -2.42 — supplementary context, not the trigger for this path.
The strongest dimensions are Risk (lower is worse) at 7.5, Momentum at 7.2, and Quality at 6.1; the weakest are Growth at 1.6, Catalyst at 3.0, and Technical at 3.4. The V9 engine flagged 1 failed gate, producing an asymmetric reward-to-risk of -2.42 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Exceptional Fcf Conversion Piotroski
Trip ifFree cash flow conversion falls below 100% of net income in any reported annual period.
- P2Target Exceeded Negative Asymmetry
Trip ifAnalyst consensus price target rises above $18, restoring more than 18% upside from current levels.
- P3Weak Momentum Volume Distribution
Trip ifMomentum score falls below 3.0 or on-balance volume declines for more than 60 consecutive trading days.
- P4Flat Revenue Growth Secular Headwind
Trip ifAnnual revenue growth falls below 0% in any reported fiscal year, indicating the business has moved into contraction.