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Can Informa PLC Oust British Sky Broadcasting Group plc And WPP PLC From Your Portfolio?

cityIt’s been a rather disappointing year thus far for investors in Informa (LSE: INF), with the events-focused media company’s shares posting losses of over 8% year-to-date. That doesn’t compare favourably to the FTSE 100, which is flat over the same time period, although it is slightly better than the 12% fall WPP’s (LSE: WPP)share price during 2014. Meanwhile, another of Informa’s sector peers, BSkyB (LSE: BSY) is up around 2% which, although markedly better than the performance of Informa and WPP, is still not particularly emphatic.

Going forward, though, can Informa outperform two of its media rivals?

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Mixed Growth Prospects

2014 is set to continue to be a challenging year for the three companies, with Sky’s earnings forecast to fall by around 4% and Informa and WPP expected to deliver zero growth this year. However, 2015 could be a different story, with all three companies expected to grow profits, albeit at different rates. For example, while Sky and WPP are forecast to post double-digit increases in earnings per share (EPS) in 2015, Informa is due to deliver a rather pedestrian growth rate of just 4%. This is roughly in line with the wider index but does not compare well to the 14% and 11% bottom-line growth that is expected at Sky and WPP respectively.

Differing Valuations

Of course, growth tends to mean shares are priced higher and it is no exception with the three media stocks. While Informa appears to offer great value at current levels, trading on a price to earnings (P/E) ratio of just 11.8, Sky and WPP’s current valuations are not as attractive. Indeed, they trade on P/Es of 15.2 and 14.5 respectively, both of which are above the P/E ratio of the FTSE 100 (13.9). Therefore, while they offer stronger growth prospects, Sky and WPP don’t seem to have the same scope for upward ratings revision as does Informa.

Looking Ahead

Further evidence of Informa’s attractive valuation is highlighted in its current yield of 4.1%. This is higher than Sky’s 3.6% and WPP’s 3.1%, thereby making Informa more appealing to income-seeking investors. For growth-seeking investors, though, Sky and WPP may edge out Informa due to their stronger prospects in 2015. Either way, all three stocks have clear merits at current price levels and a mixture of Informa, Sky and WPP could prove to be a winning strategy over the medium term.

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Peter Stephens has no position in any stocks mentioned. The Motley Fool recommends British Sky Broadcasting.

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