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Broker snap: Pearson looks 'richly priced', says Nomura
Mon, 30th Jul 2012 12:51
Publishing group Pearson was a heavy faller on Monday, extending its losses following its first-half results on Friday. Sentiment has been dampened today after Nomura reiterated its 'reduce' rating on the stock, saying that shares are 'richly priced'.
The broker noted in a research report that group organic growth was just 0.6% in the first six months of the year, "unfeasibly low" given that the shares are trading at 14.4 times earnings.
"There is £800m of acquisition firepower which could lower the P/E multiple by 1.7 turns on a fully taxed and pro forma basis, leaving the multiple at c.13x for 1-2% organic growth," Nomura said.
Analysts are suggesting that lower-multiple stocks such as Reed Elsevier and Wolters Kluwer should "trade up" or Pearson should "trade down".
Tough conditions in US education, a mis-step in training, a weak list and Borders issues at Penguin have affected performance at Pearson, Nomura says.
The broker has maintained its 1,200p target price on the stock.
By 12:51, shares were down 2.52% at 1,199p.
BC
The broker noted in a research report that group organic growth was just 0.6% in the first six months of the year, "unfeasibly low" given that the shares are trading at 14.4 times earnings.
"There is £800m of acquisition firepower which could lower the P/E multiple by 1.7 turns on a fully taxed and pro forma basis, leaving the multiple at c.13x for 1-2% organic growth," Nomura said.
Analysts are suggesting that lower-multiple stocks such as Reed Elsevier and Wolters Kluwer should "trade up" or Pearson should "trade down".
Tough conditions in US education, a mis-step in training, a weak list and Borders issues at Penguin have affected performance at Pearson, Nomura says.
The broker has maintained its 1,200p target price on the stock.
By 12:51, shares were down 2.52% at 1,199p.
BC
