The Foxes have flourished under new boss Claudio Ranieri and were top at Christmas before settling back to second behind Arsenal after narrowly escaping relegation last season.
"The first half of the season shows they are capable," the 52-year-old Pearson told BBC Radio 5 Live's Sportsweek.
"I don't see any reason why they can't (stay in the top four). I think we've seen enough results this year to suggest the sides who have been promoted are doing well and the big guns are not having it their own way."
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Pearson was sacked in June despite taking the Foxes from bottom of the Premier League to finish 14th in the table in their first season after winning promotion.
However, his tenure was often dogged by controversy -- he called a journalist an "ostrich" at a news conference and was involved in a touchline altercation with Crystal Palace midfielder James McArthur.
The former Southampton boss says he is "not angry" and "always had a good relationship with the club's owners".
"Leicester continue to do exceptionally well and I can take quite a bit of pride in how well things have been set up," Pearson added.
"Some of the best work that was done doesn't necessarily coincide with when the results were going well."
The 64-year-old Ranieri has added just three players to Pearson's squad in Gokhan Inler, N'Golo Kante and Yohan Benalouane.
However, the Italian has got the best out of striker Jamie Vardy, who is the joint top scorer in the league alongside Everton's Romelu Lukaku on 15 goals, and winger Riyad Mahrez, who has scored 13.
"He inherited a side which is more than very good but you have to give him some credit for recognising that and not doing too much with it," Pearson said.
"Management comes in lots of different forms. One thing you have to credit Ranieri for is that it's rare to inherit a football club in a positive position. Normally there's a change because results aren't going well."
(Reporting by Rob Hodgetts, editing by Pritha Sarkar)
