Critical Analysis: Houghton Mifflin Harcourt Learning Technology (HMHC) & Pearson (PSO)

Houghton Mifflin Harcourt Learning Technology (NASDAQ: HMHC) and Pearson (NYSE:PSO) are both business services companies, but which is the superior stock? We will contrast the two companies based on the strength of their analyst recommendations, profitability, valuation, risk, earnings, institutional ownership and dividends.

Risk & Volatility

Houghton Mifflin Harcourt Learning Technology has a beta of 0.59, meaning that its share price is 41% less volatile than the S&P 500. Comparatively, Pearson has a beta of 0.25, meaning that its share price is 75% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and price targets for Houghton Mifflin Harcourt Learning Technology and Pearson, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Houghton Mifflin Harcourt Learning Technology 1 4 1 0 2.00
Pearson 1 1 2 0 2.25

Houghton Mifflin Harcourt Learning Technology presently has a consensus price target of $11.17, indicating a potential upside of 49.89%. Given Houghton Mifflin Harcourt Learning Technology’s higher probable upside, equities analysts plainly believe Houghton Mifflin Harcourt Learning Technology is more favorable than Pearson.

Dividends

Pearson pays an annual dividend of $0.33 per share and has a dividend yield of 3.0%. Houghton Mifflin Harcourt Learning Technology does not pay a dividend. Pearson pays out 47.1% of its earnings in the form of a dividend.

Profitability

This table compares Houghton Mifflin Harcourt Learning Technology and Pearson’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Houghton Mifflin Harcourt Learning Technology -7.34% -18.00% -5.33%
Pearson N/A N/A N/A

Insider & Institutional Ownership

1.3% of Pearson shares are owned by institutional investors. 1.1% of Houghton Mifflin Harcourt Learning Technology shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Valuation & Earnings

This table compares Houghton Mifflin Harcourt Learning Technology and Pearson’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Houghton Mifflin Harcourt Learning Technology $1.41 billion 0.65 -$103.18 million ($1.25) -5.96
Pearson $5.81 billion 1.48 $523.25 million $0.70 15.71

Pearson has higher revenue and earnings than Houghton Mifflin Harcourt Learning Technology. Houghton Mifflin Harcourt Learning Technology is trading at a lower price-to-earnings ratio than Pearson, indicating that it is currently the more affordable of the two stocks.

Summary

Pearson beats Houghton Mifflin Harcourt Learning Technology on 12 of the 16 factors compared between the two stocks.

Houghton Mifflin Harcourt Learning Technology Company Profile

Houghton Mifflin Harcourt Company, a learning company, provides content, services, and technology solutions for educational institutions and consumers worldwide. The company operates in two segments, Education and Trade Publishing. The Education segment provides educational products, technology platforms, and services, including print and digital content in the form of textbooks, digital courseware, instructional aids, educational assessment, and intervention solutions for students. The Trade Publishing segment primarily develops, markets, and sells consumer books in print and digital formats, as well as licenses book rights to other publishers and electronic businesses; and trade and reference materials, such as adult and children's fiction and non-fiction books to schools, colleges, libraries, office supply distributors, and other businesses. This segment distributes products through retail stores comprising physical and online, and wholesalers. The company was formerly known as HMH Holdings (Delaware), Inc. and changed its name to Houghton Mifflin Harcourt Company in October 2013. Houghton Mifflin Harcourt Company was founded in 1832 and is headquartered in Boston, Massachusetts.

Pearson Company Profile

Pearson plc provides educational materials and learning technologies for teachers and students worldwide. It operates through North America, Growth, and Core segments. The company offers courseware services, including curriculum materials provided in book form and/or via access to digital content; and assessments, such as test development, processing, and scoring services. It also operates schools, colleges, and universities; and English language teaching centers, as well as provides online learning services in partnership with universities and other academic institutions. In addition, the company sells books; delivers and installs off -the-shelf software; and provides services to academic institutions, such as programme development, student acquisition, education technology, and student support services, as well as undertakes contracts to process qualifying tests for individual professions and government departments under multi-year contractual arrangements. It provides its services to governments, educational institutions, corporations, and professional bodies. Pearson plc was founded in 1844 and is headquartered in London, the United Kingdom.

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