Market Overview

3 Reasons To Be Bullish About Pearson Publishing

3 Reasons To Be Bullish About Pearson Publishing
Related PSO
25 Stocks Moving In Friday's Pre-Market Session
Stocks That Could Graduate To Big Gains On Betsy DeVos' Confirmation As Education Secretary
The Klein Law Firm Reminds Investors of a Class Action Filed on Behalf of Pearson plc ... (GuruFocus)

Even in the age of Amazon (NASDAQ: AMZN), there's still reason to be bullish about Pearson Publishing (NYSE: PSO), a British book publisher. Indeed, Pearson Publishing stacks up well against the likes of Apple (NASDAQ: AAPL) and Microsoft (NASDAQ: MSFT).

Educated Profit Margin

Pearson has a strong position in educational materials, which fuels a profit margin of 16.50 percent. Amazon's is only 0.20 percent. Yes, Amazon is plowing money into a massive expansion program, but the profit margin of Pearson challenges that of Apple (21.60 percent) and Microsoft (25.60 percent), too.

Related Link: 3 Reasons To Follow The Big Dog In Natural Resources


So does its dividend yield!

The dividend yield for Pearson is 5.68 percent. Amazon does not have a dividend yield for much the same reason its profit margin is lacking: There is a call on cash elsewhere. Pearson's is much higher than the 1.67 percent rate for Apple and Microsoft's 2.49 percent mark.

A Falling Pound Would Bring Rising Profits

Pearson also has upside in that the strong pound is hurting sales abroad.

When the pound is stronger, British exports are more expensive. If the pound falls, Pearson becomes more competitive. For savvy investors, that is a factor that can result in higher profits as currency prices fluctuate. Should the pound fall, Amazon, Apple and Microsoft will not profit, but Pearson will.

It has not been a good year for Pearson, but investors should take a long-term outlook.

Earnings over the next five years are projected to be nearly 10 percent better than those for the previous half decade. With the dividend and currency considerations, that should reward long-term investors.

Disclosure: Jonathan Yates does not have a position in any of the stocks mentioned in this article.

Posted-In: british pound publishing industryLong Ideas Dividends Trading Ideas Best of Benzinga


Related Articles (AAPL + AMZN)

View Comments and Join the Discussion!