Are these two media stocks the buys of the day?

Are these two stocks ‘must-haves’ for your portfolio after news today?

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Harry Potter publisher Bloomsbury (LSE: BMY) released results for its half-year ended 31 August this morning. Group revenue soared 19% and the company said that it’s “trading in line with management’s expectations.” Does the strong top-line performance make this stock a buy of the day?

Wizard revenue growth

Bloomsbury has recently reorganised the group from four to two divisions to simplify the business and increase customer focus. This already seems to be bearing fruit. In the consumer division, revenue growth was an impressive 36% to £37.3m, with Children’s Trade up 63% and Adult Trade up 5%. In the non-consumer division revenue ticked up modestly to £25.4m from £25.2m, reflecting the end of a seven-year contract with Qatar Foundation, offset by the acquisition of some law publishing titles.

However, despite the excellent top-line result, pre-tax profits fell on both an underlying basis (£1.46m from £1.86m) and a statutory basis (£0.11m from £0.27m). In this context, the company highlights the end of the Qatar Foundation contract. However, looking at the income statement, a £2m increase in marketing and distribution costs and a £1m increase in administrative costs strike me as not insignificant.

Ahead of today’s results, the analyst consensus for the full year was for an earnings decline of 24%, which at a share price of 154p (up 4% today) gives a P/E of 13.3. That doesn’t strike me as outstanding value, although if the company raises its final dividend in line with today’s 4% rise in the interim, there’s also an attractive 4.3% yield.

Firing on all cylinders

Another company in the media sector, FTSE 100 giant Relx (LSE: REL), also released news today. The global professional information and analytics group reported underlying revenue growth of 4% for the first nine months of 2016. Management said it’s confident of delivering “underlying revenue, profit, and earnings growth” for the full year.

Revenues in the first nine months have increased across all four of Relx’s divisions. Risk & Business Analytics led the way with a 9% rise, followed by Exhibitions at 5%. The Scientific, Technical & Medical division and Legal division each delivered growth of 2%.

With the group confidently reaffirming the outlook for the full year, the shares have ticked modestly higher to 1,442p. City analysts are expecting earnings to be 16% ahead of last year, giving a P/E of 20.6, falling to 18.6 for 2017 on expectations of further double-digit earnings growth. Dividend forecasts give a yield of 2.4%, rising to 2.6%.

While Relx has a significantly higher P/E than Bloomsbury, and a lower dividend yield, the FTSE 100 firm merits a premium, due to its much larger size and the fact that it’s firing on all cylinders, not only on revenue but also (unlike Bloomsbury) on profit.

Both companies could reward long-term investors, but I believe Relx’s size, stability and prospects for earnings growth make it the more attractive stock to buy right now.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

G A Chester has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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