Critical Review: Pearson (NYSE:PSO) versus Walt Disney (NYSE:DIS)

Pearson (NYSE:PSO) and Walt Disney (NYSE:DIS) are both consumer discretionary companies, but which is the superior stock? We will contrast the two businesses based on the strength of their analyst recommendations, profitability, institutional ownership, risk, dividends, valuation and earnings.

Risk & Volatility

Pearson has a beta of 0.38, suggesting that its stock price is 62% less volatile than the S&P 500. Comparatively, Walt Disney has a beta of 1.39, suggesting that its stock price is 39% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Pearson and Walt Disney, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Pearson	0	4	1	1	2.50
Walt Disney	1	5	16	1	2.74

Walt Disney has a consensus price target of $134.47, suggesting a potential upside of 30.70%. Given Walt Disney’s stronger consensus rating and higher probable upside, analysts plainly believe Walt Disney is more favorable than Pearson.

Dividends

Pearson pays an annual dividend of $0.47 per share and has a dividend yield of 3.1%. Walt Disney pays an annual dividend of $1.50 per share and has a dividend yield of 1.5%. Walt Disney pays out 24.0% of its earnings in the form of a dividend.

Earnings and Valuation

This table compares Pearson and Walt Disney”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Pearson	$4.72 billion	1.96	$441.77 million	N/A	N/A
Walt Disney	$94.43 billion	1.89	$12.40 billion	$6.26	16.43

Walt Disney has higher revenue and earnings than Pearson.

Institutional and Insider Ownership

2.1% of Pearson shares are owned by institutional investors. Comparatively, 65.7% of Walt Disney shares are owned by institutional investors. 0.1% of Pearson shares are owned by company insiders. Comparatively, 0.2% of Walt Disney shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares Pearson and Walt Disney’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Pearson	N/A	N/A	N/A
Walt Disney	11.54%	8.92%	5.10%

Summary

Walt Disney beats Pearson on 11 of the 14 factors compared between the two stocks.

About Pearson

Pearson plc offers educational courseware, assessments, and services in the United Kingdom, the United States, Canada, the Asia Pacific, other European countries, and internationally. The company operates through five segments: Assessment & Qualifications, Virtual Learning, English Language Learning, Workforce Skills, and Higher Education. The Assessment & Qualifications segment offers Pearson VUE, US student assessment, clinical assessment, UK GCSE, and A levels and international academic qualifications and associated courseware. The Virtual Learning segment provides virtual schools and online program management services. The English Language Learning segment offers Pearson test of English, institutional courseware, and English online solutions. The Workforce Skills offers BTEC, GED, TalentLens, Faethm, Credly, Pearson college, and apprenticeships. The Higher Education segment engages in the US, Canadian, and international higher education courseware businesses. The company was founded in 1844 and is headquartered in London, the United Kingdom.

About Walt Disney

The Walt Disney Company operates as an entertainment company worldwide. It operates through three segments: Entertainment, Sports, and Experiences. The company produces and distributes film and television video streaming content under the ABC Television Network, Disney, Freeform, FX, Fox, National Geographic, and Star brand television channels, as well as ABC television stations and A+E television networks; and produces original content under the ABC Signature, Disney Branded Television, FX Productions, Lucasfilm, Marvel, National Geographic Studios, Pixar, Searchlight Pictures, Twentieth Century Studios, 20th Television, and Walt Disney Pictures banners. It also offers direct-to-consumer streaming services through Disney+, Disney+ Hotstar, Hulu, and Star+; sports-related entertainment services through ESPN, ESPN on ABC, ESPN+ DTC, and Star; sale/licensing of film and episodic content to third-party television and VOD services; theatrical, home entertainment, and music distribution services; DVD and Blu-ray discs, electronic home video licenses, and VOD rental services; staging and licensing of live entertainment events; and post-production services. In addition, the company operates theme parks and resorts comprising Walt Disney World Resort, Disneyland Resort, Disneyland Paris, Hong Kong Disneyland Resort, Shanghai Disney Resort, Disney Cruise Line, Disney Vacation Club, National Geographic Expeditions, and Adventures by Disney, as well as Aulani, a Disney resort and spa in Hawaii. It also licenses its intellectual property to a third party for operations of the Tokyo Disney Resort; licenses trade names, characters, visual, literary, and other IP for use on merchandise, published materials, and games; operates a direct-to-home satellite distribution platform; sells branded merchandise through retail, online, and wholesale businesses; and develops and publishes books, comic books, and magazines. The company was founded in 1923 and is based in Burbank, California.