Communication Services · Publishing · NYSE · United States
$18.24-0.82%
Market cap $11.0BNext earnings 2026-07-31Updated Oct 18, 2026
Our verdict
Trades 22% above our fair value
Price
$18.24
Model fair valueConfidence: good
$15.01
Model range
$8.04 to $19.74
Fair value $15.01
Price $18.24
5 models fit Pearson Plc Common Stock and they disagree: 1 of 5 land within 15% of the average.
Two or more of our models back this value.
Premium(i)Bronze53
Valued as a mature, profitable company: Discounted cash flow, P/E comparison, EV/EBITDA comparison, Graham number, and Dividend discount.
ACCE opinionPearson Plc Common Stock (PSO)
Fair value (5 models)
$15.01
ACCE price target
$15.70
Rating
Overvalued
Horizon
12 months
Fair value published on 18 Oct 2026, 17:04 CEST; previously $14.69 since 14 Oct 2026, 00:00 CEST.
ACCE price target published on 10 Oct 2026, 00:00 CEST.
Rating published on 18 Oct 2026, 17:04 CEST.
Price used: $18.24 at the close on 23 Oct 2026, 22:00 CEST.
Models: Discounted cash flow, P/E comparison, EV/EBITDA comparison, Graham number, and Dividend discount.
Fair value: the average of the applicable valuation models (discounted cash flow, multiples, residual income, dividend discount, shareholder yield), each run on the latest financial statements and the market price shown. Opinion columns (fair value, target, rating) are shown apart from the data. Full methodology: acceinvestments.com/data/how-we-value-stocks
Conflicts of interest: The author holds no personal position in this security. General statement
Produced by ACCE Investments (acceinvestments.com)
Data
Price vs fair value
21.5% above
-17.7% to fair value
ACCE score
62
out of 100
Analysts
0% buy
2 covering
P/E
27.2x
forward 18.8x
1-year return
+22.8%
Dividend yield
1.88%
Pearson Plc Common Stock in four questions
Plain answers, details below
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Overview
ACCE thesis
Pearson sells digital learning platforms, including MyLab and Mastering for higher education, Pearson+ for direct-to-consumer study, and assessment and qualifications services such as the Pearson VUE testing business. The moat rests on embedded adoption: once an instructor builds a course around its homework platform and content, switching costs are high, and the 52% gross margin reflects that mix of recurring digital revenue. Revenue growth of 3.3% is modest, but the forward P/E of 18.0 against a trailing 25.9 implies earnings expected to rise faster than sales as margins recover from a 13.3% operating margin. The next leg depends on converting that growth into free cash flow and on whether the digital mix keeps lifting profitability. With a $10.7B market cap and no index membership, the name sits outside the mainstream screens, which may leave the valuation gap underpriced, though a 9.2% ROE says the returns have yet to match the franchise.
⚠ Investor warnings · 2 flagsAI-assisted·How I use AI
moderate
Earnings declining despite revenue growth
Revenue grew 3.3% year on year but earnings fell 2.9%, so margin gains are not reaching the bottom line. The 27.2 trailing P/E sits well above the 18.0 forward P/E, which means the market is pricing in a recovery.
moderate
Price well above valuation estimates
The stock trades 21.5% above the model fair value of $15.01, and 16.2% above the ACCE price target of $15.70. Both gaps leave little margin for error if growth stays near 1% a year.
AI research notes
AI-assisted·How I use AIWritten Oct 19, 2026 · figures from 2026-06-30 · prices to Oct 23, 2026
Why it could do well
Free cash flow over the last twelve months reached GBP 647M, and the stock yields 7.9% on that cash flow.
The diluted share count fell 3.5% last fiscal year, so each remaining share claims a larger slice of the business.
Debt is modest at 0.41 times equity, and the dividend yield of 1.9% is paid from a balance sheet that is not stretched.
Why it could disappoint
At $18.24 the shares trade 21.5% above the model fair value of $15.01, and all five valuation models in the consensus are used.
Return on invested capital of 5.2% is thin, and net margin of 8.8% leaves little room for error.
Revenue grew only 1.0% per year on average over five years, and the price implies 10.4% annual cash flow growth for five years.
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Valuation
INVESTOR
Where PSO's valuation models land
Price
$18.24
Model fair value
$15.01
Model range
$8.04 to $19.74
Fair value $15.01
Price $18.24
The price sits inside the model range.
Model
Fair value
Upside
Discounted cash flow
Dividend discount
EV/EBITDA comparison
Graham number
P/E comparison
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Quality
INVESTOR
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