This Stock Is at the Top of Its Industry

Disclaimer: My favorite news source is The Financial Times, which is owned by Pearson (NYS: PSO) , the subject of this article. Having confessed my potential conflict of interest, I can now, with clear conscience, set about telling you why Pearson is a publishing company that's keeping up with the digital age, and a company worth keeping your eye on.

Tom Clancy approved
Pearson is an international media and education powerhouse and publishes in the education, business, and consumer markets. If you've ever read Tom Clancy, Nora Roberts, John Steinbeck, or a host of other well-known authors, you've read a Penguin book. Penguin is a Pearson holding.

But 68% of Pearson's sales come from the education side of the business, and the company's revenue in that space is the highest in its peer group, a space that includes industry stalwarts McGraw-Hill (NYS: MHP) and Apollo Group (NAS: APOL) .

Not your father's publishing company
Second-half results for 2011 paint a growing and profitable picture for Pearson:

  • Total sales are up a healthy 6%.
  • Total profits were up a more-than-healthy 20%.
  • FT Group sales, which operates Pearson's business publications, are up 7%, with profits up 10%.

Penguin's sales are 4% lower, but profits have stayed steady because of rapid digital growth. Dame Marjorie Scardino, Pearson's chief executive, recently told The Financial Times that the company was "well placed to exploit accelerating structural changes in its industries, such as the move to digital delivery of content." Walking the digital talk:

  • Pearson's digital education platform and service registrations are up 15%.
  • subscriptions are up more than 30%, which is extra impressive considering there's a pay wall.
  • Penguin e-book revenue is up almost 130%.

And developing markets -- including Africa, Middle East, Asia, and Latin America -- are another bright spot for Pearson, with total sales for all areas up 40%.

There's nothing to fear but un-Foolish fears
Pearson is currently trading for slightly less than $18, with a very attractive P/E of just 7.3. Peer Scholastic (NAS: SCHL) has a P/E right now of 23. John Wiley & Sons' (NYS: JW.A) is 15.

Investors have steered clear of traditional publishing companies lately, fearing they weren't making the necessary adjustments to stay competitive in the digital age. Pearson is not one of these companies. It's forward-thinking, forward-moving, and worthy of closer look by the investment community.

Fool contributor John Grgurich just loves that cute little penguin waddling around on the spines of his Kurt Vonnegut novels, but he owns no shares of any of the companies mentioned in this article. Motley Fool newsletter services have recommended buying shares of John Wiley & Sons. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

At the time this article was published

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