FINANCIAL ANALYSIS

Financial Analysis: Pearson Education Group



Financial Analysis: Pearson Education Group

Company Overview

Pearson (or “the company”) is an international media and education company, operating businesses in the education, business information and consumer publishing markets (Pearson 2011). Pearson generates revenues through five business divisions: North American education (46.6% of the total revenues in FY2010), international education (21.8%), Penguin (18.6%), FT group (7.1%),and professional (5.9%).Revenues by Division. In FY2010, the North American education division recorded revenues of £2,640 million ($4,082.3million), an increase of 6.9% over 2009.The international education division recorded revenues of £1,234 million ($1,908.2 million) in FY2010,an increase of 19.2% over 2009.The Penguin division recorded revenues of £1,053 million ($1,628.3 million) in FY2010, an increase of 5.1% over 2009.The FT group division recorded revenues of £403 million ($623.2 million) in FY2010, an increase of12.6% over 2009.The professional division recorded revenues of £333 million ($514.9 million) in FY2010, an increase of 21.1% over 2009 (Pearson 2011).

Competitor and industry Analysis

The company's significant position in education domain helps it to retain and attract more customers and supports top line growth (Pearson 2011). However, intense competition may lead to pricing pressures thereby adversely affecting the company's operating margins and market share. The group has to face competition from other publishing houses within the industry. The competition is not intense in the United States. However, in Asian and European markets, the group has set solid foundations. The following companies are the major competitors of Pearson plc

McGraw-Hill Companies, Inc., The

New York Times Company, The

News Corporation Limited, The

Bloomberg LP

Houghton Mifflin Harcourt Publishing Company

Random House Inc

Hachette Group

HarperCollins Publishers

The Washington Post Company

Financial Highlights as of 12/31/2010 in GBP

Income Statement

 

 

(In Thousands)

Total Revenue

 

 

5,663,000

EBITDA

 

 

711,000

Operating Income

 

 

702,000

Net Income

 

 

1,297,000

Revenue per Share

 

 

7.07

EPS - Net Income - Diluted

 

 

1.62

Share Outstanding

 

 

798,668

Weighted Average Shares Outstanding - Diluted

 

 

801,200

Weighted Average Shares Outstanding - Basic

 

 

803,000

Earnings per Share - Basic

 

 

1.62

Balance Sheet

 

 

(In Thousands)

Total Assets

 

 

10,668,000

Current Assets

 

 

4,167,000

Total Liabilities

 

 

5,130,000

Long Term Debt

 

 

1,908,000

Stockholders' Equity

 

 

5,538,000

Total Assets per Share

 

 

13.36

Current Liabilities

 

 

2,242,000

Net Assets per Share

 

 

6.93

Cash Flow Statement

 

 

(In Thousands)

Cash from Operations

 

 

1,006,000

Cash from Investing

 

 

71,000

Cash from Financing

 

 

(92,000)

Cash Flow per Share

 

 

1.25

Cash & Cash Equivalents, Beginning of Year

 

 

680,000

Cash & Cash Equivalents, End of Year

 

 

1,664,000

Stock Price and Valuation (Data as of 11/23/2011)

 

 

 

Market Cap(mil)

 

 

13,372

Share Outstanding(000's)

 

 

801,697

Dividend Per Share(TTM)

 

 

0.6416

Last Closing Price

 

 

16.68

Previous Trading Day Range

 

 

16.65 - 16.91

52 Week Range

 

 

14.50 - 19.40

7 Day Average Closing Price

 

 

17.2

30 Day Average Closing Price

 

 

18.1

200 Day Average Closing Price

 

 

18.23

High Price Last 3 Mos.

 

 

19.24

Low Price Last 3 Mos.

 

 

16.68

Avg Daily Volume Last 3 Mos.

 

 

167,294.37

 

 

 

 

 

 

 

 

Management Effectiveness

 

 

 

ROA % (Net)

 

 

12.92

ROE % (Net)

 

 

26.25

ROI % (Operating)

 

 

9.89

Profitability Ratios

 

 

 

Gross Margin

 

 

54.3

Operating Margin

 

 

12.4

EBITDA Margin %

 

 

12.56

Calculated Tax Rate %

 

 

23.21

Profit Margin (TTM)

 

 

22.9

Valuation Ratios

 

 

 

Price/Earnings (TTM)

 

 

6.32

Price/Book (TTM)

 

 

1.48

Price/Cash Flow(TTM)

 

 

8.15

Asset Management

 

 

 

Total Asset Turnover

 

 

0.56

Receivables Turnover

 

 

4.32

Inventory Turnover

 

 

5.92

Property Plant & Equip Turnover

 

 

15.02

Cash & Equivalents Turnover

 

 

4.56

Debt Management

 

 

 

Interest Coverage

 

 

9.62

Long Term Debt/Equity

 

 

0.34

Long Term Debt as % of Invested Capital

 

 

24.31

Total Debt/Equity

 

 

0.42

Accounts Payable Turnover

 

 

12.17

Accrued Expenses Turnover

 

 

10.17

Liquidity Indicators

 

 

 

Quick Ratio

 

 

1.38

Current Ratio

 

 

1.86

Net Current Assets as % of Total Assets

 

 

18.04

Free Cash Flow per Share

 

 

1.16

Revenue to Assets

 

 

0.53

Consensus Estimates

2011Ae

-

-

Earnings Per Share

1.34

-

-

Revenue

9,430.27

-

-

EBITDA

1,679.62

-

-

 

 

 

 

Ratio Analysis with comparison

Profitability Ratios

12/31/2010

12/31/2009

ROA % (Net)

12.92

4.4

ROE % (Net)

26.25

9.35

ROI % (Operating)

9.89

10.77

EBITDA Margin %

12.56

12.84

Calculated Tax Rate %

23.21

31.43

 

 

 

Liquidity Ratios

12/31/2010

12/31/2009

Quick Ratio

1.38

1.22

Current Ratio

1.86

1.85

Net Current Assets % TA

18.04

15.59

 

 

 

Debt Management

12/31/2010

12/31/2009

LT Debt to Equity

0.34

0.45

Total Debt to Equity

0.42

0.46

Interest Coverage

9.62

8.53

 

 

 

Asset Management

12/31/2010

12/31/2009

Total Asset Turnover

0.56

0.58

Receivables Turnover

4.32

4.29

Inventory Turnover

5.92

5.37

Accounts Payable Turnover

12.17

12.35

Accrued Expenses Turnover

10.17

10.93

Property Plant & Equip Turnover

15.02

13.87

Cash & Equivalents ...