‘Could do better’. This was title line of a research note on Pearson PLC (LON:PSON), the educational publisher, which is battling tough trading conditions.
Earlier this month, in its third-quarter update, it unveiled a worse than expected 7% decline in revenues.
The ‘chief culprit’, according to Morgan Stanley, was the company’s higher education business.
Reducing his EBITDA forecasts 1-8% for the years 2017-19, analyst Patrick Wellington took a closer look at his valuation model too.
His target price comes down by £1.50 to £9 a share, while the recommendation moves to ‘equal-weight’ from ‘overweight’ previously.
He does point out the stock, which trades at less than 11 times 2018 earnings per share, yields a very chunky 6.9%.
Of the 17 analysts polled by the Broker Forecasts website, seven have ‘buy’ recommendations on the stock, with the remainder either ‘sellers’ or ‘neutral’.