Is Now the Time to Buy Pearson?

LONDON -- I'm always searching for shares that can help ordinary investors like you make money from the stock market.

So, right now, I am trawling through the FTSE 100, and giving my verdict on every member of the blue-chip index. Simply put, I'm hoping to pinpoint the very best buying opportunities in today's uncertain market.

Today, I am looking at�Pearson� (LSE: PSON  ) (NYSE: PSO  ) to determine whether you should consider buying the shares at 1,166p.

I am assessing each company on several ratios:

• Price/Earnings (P/E):�Does the share look good value when compared against its competitors?
• Price Earnings Growth (PEG):�Does the share look good value factoring in predicted growth?
• Yield:�Does the share provide a solid income for investors?
• Dividend Cover:�Is the dividend sustainable?

So let's look at the numbers:

Stock	Price	3-yr EPS growth	Projected P/E	PEG	Yield	3-yr dividend growth	Dividend cover
Pearson	1,166p	9%	14.3	N/A	3.8%	15%	1.9

The consensus analyst estimate for next year's earnings per share is 81.5p (3% fall), and dividend per share is 48p (7% growth).

Trading on a projected P/E of 14.3, Pearson appears significantly cheaper than its peers in the media sector, which are currently trading on an average P/E of around 18.5.

Unfortunately, Pearson's P/E. and falling near-term earnings. give a negative PEG ratio, which cannot help with my analysis.

At 3.8%, Pearson's dividend income is above the media sector average of 2.7%. Furthermore, Pearson has a three-year compounded dividend growth rate of 15%, implying that the yield will continue to stay above that of its peers.

Indeed, the dividend is nearly twice covered by earnings, giving Pearson plenty of room for further payout growth.

Pearson currently looks cheaper than its peers, but is now the time to buy?
Pearson is the owner of the�Financial Times�newspaper and the�Penguin�publishing brand. In addition, the company is the world leader in educational materials such as textbooks, digital education software, and examination papers.

Indeed, due to Pearson's world-leading position in education, the company was able to raise North American education revenues by 2% during 2012, while aggregate revenues for the North American education market as a whole fell by 10%.

That said, like the rest of the publishing sector, Pearson is at risk from falling sales in the traditional book market.

However, the company is taking steps to reduce its reliance on traditional publishing and, at the end of 2012, 50% of all Pearson's sales were digital-based.

In particular, digital subscriptions for the�Financial Times�grew 18% during 2012, which meant that, for the first time in its history, there were more copies of the newspaper sold online than sold in print. Furthermore, at the end of 2012, 17% of�Penguin�sales were in digital e-book form.

Nonetheless, despite these strong figures, Pearson's management remains cautious about the future, and recently announced a restructuring plan aimed at reducing costs by around �100 million a year from 2014.

So, all in all, taking into account Pearson's market-leading positions, restructuring plan, and current discount to sector peers, I feel now looks to be a good time to buy Pearson at 1,166p.

More FTSE opportunities
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In the meantime, please stay tuned for my next verdict on a FTSE 100 share.