If I’d invested £1k in Pearson shares one year ago, here’s how much I’d have now!

While most investors are having a tough 2022, anyone is holding on Pearson (LSE: PSON) show is always a laugh.

Today, I’m taking a closer look at the performance of the publishing and education giant and how much money I’ll make if I’m smart (or lucky) enough to buy the stock.

When learning pays

Let’s not beat about the bush. Pearson shares are up 53% last year.

So if I invest £1,000 in Pearson shares at the start of 2022, I will have a capital gain of around £530 at the end of December (less expenses).

If we use yesterday’s date and go back 12 months, I will only be less, £500 or more.

For clarity, the returns mentioned above do not include contributions from dividends. So the result is correct advisable of this in both cases. Convenient!

Above stock (almost)

Clearly, this is a great result, considering how other companies are FTSE 100 fared in 2022. Look at housebuilders, retailers and anything related to technology for proof.

In fact, Pearson’s performance left him second Place when it comes to top-performing stocks. It was only beaten by the defensive giants BAE system. I’m pretty sure I don’t need to explain why the latter proved so popular among investors last year.

Why is Pearson stock doing so well?

Unsurprisingly, the company consistently beats expectations. Indeed, this month’s trading update said the group’s underlying sales had grown by 5%. Benefiting from good trading in English and Virtual Learning, Workforce Skills and Assessment & Qualifications, adjusted operating profit rose 11% to £455m.

Pearson also describes that it has “reshaping“portfolio for growth. Part of this includes switching to subscription-based digital services. Strange as it may seem, this is actually no different from the giant’s business model Netflix and Amazon have chased.

More coming?

Unfortunately, I didn’t own this stock in 2022 (and still don’t). So the dilemma for me is whether Pearson stock is worth buying now.

The company is clearly a more efficient animal. In fact, it has said that “on track to deliver cost efficiencies of around £120m by 2023“. As difficult as the cost-of-living crisis is, I also tend to think that many people will be looking for ways to stand up in the job market if we see an ongoing recession.

Against this, it can be argued that this good news is now reflected in the price. A value stock for the year, Pearson is currently trading at 16 times forecast earnings for FY23. It’s still not cheap but I wonder if investors will stick around (and not take profits) when growth stocks come back into fashion.

Not for me

Overall, it’s important to acknowledge how far Pearson has come from where it once was. The relatively defensive education sector is also attractive, although the dividend here is not what it used to be. The forecast yield is 2.5% as I type.

As someone eager to take advantage of the temporary hissy-fit of the market and buy up quality growth stocks on the cheap, however, buying Pearson shares now is not a priority for me.