As of October 12, 2025, Pearson PLC's estimated intrinsic value ranges from $890.09 to $1189.69 per share, depending on the valuation methodology applied.
| Valuation Method | Fair Value (USD) | Implied Upside/Downside |
|---|---|---|
| Discounted Cash Flow (10Y) | $1189.69 | +13.1% |
| Discounted Cash Flow (5Y) | $1118.64 | +6.3% |
| Dividend Discount Model (Multi-Stage) | $890.09 | -15.4% |
| Dividend Discount Model (Stable) | $958.37 | -8.9% |
| Earnings Power Value | $1165.63 | +10.8% |
Is Pearson PLC (PSON.L) undervalued or overvalued?
With the current market price at $1052.00, the stock appears to be fairly valued.
Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Pearson PLC's intrinsic value, including:
The cost of capital is a critical factor in valuation models, representing the required return for investors.
| WACC Component | Low | High |
|---|---|---|
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.6 | 0.69 |
| Cost of equity | 7.6% | 9.8% |
| Cost of debt | 4.7% | 4.7% |
| Tax rate | 14.1% | 18.0% |
| Debt/Equity ratio | 0.22 | 0.22 |
| After-tax WACC | 6.9% | 8.7% |
Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:
| DCF Model | Fair Value | Enterprise Value | % from Terminal Value |
|---|---|---|---|
| 5-Year Growth | $1,119 | $8,279M | 77.0% |
| 10-Year Growth | $1,190 | $8,732M | 58.6% |
| 5-Year EBITDA | $571 | $4,781M | 60.2% |
| 10-Year EBITDA | $748 | $5,917M | 38.8% |
The DDM values a company based on its expected future dividend payments. We used two approaches:
EPV assesses a company's value based on its current normalized earnings power, assuming no growth.
| EPV Component | Value |
|---|---|
| Normalized Earnings | $662M |
| Discount Rate (WACC) | 8.7% - 6.9% |
| Enterprise Value | $7,587M - $9,571M |
| Net Debt | $1,141M |
| Equity Value | $6,446M - $8,430M |
| Outstanding Shares | 6M |
| Fair Value | $1,010 - $1,321 |
| Selected Fair Value | $1165.63 |
| Metric | Value |
|---|---|
| Market Capitalization | $6713M |
| Enterprise Value | $7854M |
| Trailing P/E | 15.22 |
| Forward P/E | 15.03 |
| Trailing EV/EBITDA | 5.20 |
| Current Dividend Yield | 236.87% |
| Dividend Growth Rate (5Y) | 1.67% |
| Debt-to-Equity Ratio | 0.22 |
To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:
| Valuation Method | Weight | Weighted Value |
|---|---|---|
| Discounted Cash Flow (10Y) | 30% | $356.91 |
| Discounted Cash Flow (5Y) | 25% | $279.66 |
| Dividend Discount Model (Multi-Stage) | 20% | $178.02 |
| Dividend Discount Model (Stable) | 15% | $143.76 |
| Earnings Power Value | 10% | $116.56 |
| Weighted Average | 100% | $1074.91 |
Based on our comprehensive valuation analysis, Pearson PLC's intrinsic value is $1074.91, which is approximately 2.2% above the current market price of $1052.00.
Key investment considerations:
Given these factors, we believe Pearson PLC is currently fairly valued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.