LONDON — I’m always searching for shares that can help ordinary investors like you make money from the stock market.
So, right now, I am trawling through the FTSE 100, and giving my verdict on every member of the blue-chip index. Simply put, I’m hoping to pinpoint the very best buying opportunities in today’s uncertain market.
Today, I am looking at Pearson PLC (ADR) (NYSE:PSO) to determine whether you should consider buying the shares at 1,166p.
I am assessing each company on several ratios:
Price/Earnings (P/E): Does the share look good value when compared against its competitors?
Price Earnings Growth (PEG): Does the share look good value factoring in predicted growth?
Yield: Does the share provide a solid income for investors?
Dividend Cover: Is the dividend sustainable?
So let’s look at the numbers:
|Stock||Price||3-yr EPS growth||Projected P/E||PEG||Yield||3-yr dividend growth||Dividend cover|
The consensus analyst estimate for next year’s earnings per share is 81.5p (3% fall), and dividend per share is 48p (7% growth).
Trading on a projected P/E of 14.3, Pearson appears significantly cheaper than its peers in the media sector, which are currently trading on an average P/E of around 18.5.
Unfortunately, Pearson’s P/E. and falling near-term earnings. give a negative PEG ratio, which cannot help with my analysis.
At 3.8%, Pearson’s dividend income is above the media sector average of 2.7%. Furthermore, Pearson has a three-year compounded dividend growth rate of 15%, implying that the yield will continue to stay above that of its peers.
Indeed, the dividend is nearly twice covered by earnings, giving Pearson plenty of room for further payout growth.
Pearson currently looks cheaper than its peers, but is now the time to buy?
Pearson is the owner of the Financial Times newspaper and the Penguin publishing brand. In addition, the company is the world leader in educational materials such as textbooks, digital education software, and examination papers.