Tuesday newspaper share tip: Pearson scrutinised

It is a measure of the market's distrust for Pearson that its shares plunged in the wake of a trading statement on Monday that actually confirmed expectations for the current year and 2018.

So argued The Times' Tempus column, which opined investors might consider avoiding the media group's shares.

"There is not a lot said for 2017, though (in the trading statement), and trading in its North American higher education unit, a core business and a short third of sales, is not good," said Tempus.

"It will take until next summer to prove whether this is a temporary blip or an underlying problem."

The column observed that Pearson was poised to enjoy a huge benefit from sterling's dive against the US dollar. "Take this out and sales are still down by 10% at this business.

"That sterling gain has probably put paid to concerns over the dividend, which on the present guidance is just about covered, which is fortunate," the column asserted.

It contended that this was about all that there was supporting the share price, citing the "market mistrust and the uncertainties ahead."

Pearson's shares now yielded almost 7% and sold on 13-times' earnings.

"By any measure this is historically cheap and the braver investor might consider the share price weakness a buying opportunity," Tempus asserted.

"I would be cautious, though, about climbing back on board, given the potential for further shocks."