After falling 25% from its high this year, the educational specialist Pearson PLC (LON:PSON) is just too cheap, according to Morgan Stanley.
The market is treating the textbook publisher as if it is about issue another earnings alert and perhaps even cut its dividend.
Morgan Stanley doesn’t think this will happen. This means Pearson’s bargain-basement earnings multiple of ten times is too low to ignore.
“Pearson won't warn at the Q3 (results at the end October), the peak trading period,” the American bank said.
“Given the underperformance, low rating and big dividend yield – almost 7% – we think the shares will bounce strongly on this.”
The shares, it reckons, are worth £10.50 each. At 3.20pm they were changing hands for 807p, up 6%.