PSOPearson plc
Is the business good?
The checks split: nothing decisive, though earnings fully cash-backed (1.8×).
Operating profit is fully backed by cash. Conversion is improving vs a year ago.
Positive operating leverage, operating profit is growing faster than sales, so margins widen as the business scales.
A balanced mix of margins, efficiency, and leverage. ROE 9% = margin × turnover × leverage.
Unless marked, from derived.
Where this answer is blind. The F-score rewards improvement, so an already-elite company can score mid-pack.
How good a business is PSO?
Pearson plc earns 8.3% on the capital it employs against a 9.0% cost of capital, so growth costs more than it returns.
Return on invested capital · cost of capital 9.0% · 0.75 points below what the capital costs: growth destroys value
- Operating margin
- 14%
Operating margin · Publishing median 15% · fiscal year to FY2025
- Cash conversion
- 1.76×
Cash conversion · 1.36× a year ago · operating cash flow covers the operating profit after tax
- Share count, year on year
- −3.5%
Share count, year on year · bought back, each share owns more of the company
| Year | Operating margin |
|---|---|
| FY2020 | 12% |
| FY2021 | 5.3% |
| FY2022 | 7.1% |
| FY2023 | 14% |
| FY2024 | 15% |
| FY2025 | 14% |
Details›
- Gross marginfiscal year to FY2025
- 52%
- Operating marginfiscal year to FY2025
- 14%
- Net marginfiscal year to FY2025
- 9.4%
- R&D as % of revenue
- 0.22%
- Revenue, trailing twelve months
- $3.58B
- Net income, trailing twelve months
- $335M
- Return on invested capitaloperating profit after tax ÷ debt + equity − cash
- 8.3%
Margins, capital and share counts from the statements as filed with the SEC; cash conversion is operating cash flow over operating profit after tax.