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One FTSE 100 stock I’d consider buying today, and one that can wait

Theme park owner Merlin Entertainments (LSE: MERL) is up 3% today after reporting an extra million visitors to its attractions last year, lifting the total to a record high of 67m.

Positive theme

This worked its magic on the bottom line, as revenues climbing 5.9% to £1.69bn helped underlying earnings rise 4.3% at £494m. The group’s attractions, which include Madame Tussaud’s, London Dungeon, the London Aquarium and London Eye, had been hit by a drop in tourism in the capital since the 2017 terrorist attacks. Now the crowds are back, and Merlin is reaping the benefit, with a 4.9% rise in pre-tax profits to £285m.

Its resort theme parks division did particularly well with organic revenues up 9.1%, “driven by successful product investment, favourable weather and another strong Halloween period.” LEGOLAND Parks’ organic revenue increased 6.4% due to the opening of a record 644 accommodation rooms, offsetting a broadly flat performance.

LEGO lands

CEO Nick Varney said the group continues to mitigate ongoing external cost pressures and expects to deliver up to £35m of annualised savings by 2022. He also said it’s well placed to deliver long-term growth and returns and benefit from long-term trends such as a rising consumer spend and the increased focus on shared experiences.

The group is planning to open new LEGOLANDs in New York in 2020, and South Korea by 2022, which will prove capital intensive so investors will want to keep an eye debt levels. However, the results are good for what is traditionally a quiet time of the year. Merlin needs to grow strongly, with a slightly pricey forward valuation of 17.1 times earnings, and a PEG of 4.2.

Investors are positive today, though. The dividend yield is just 2.2%, although with healthy cover of 2.7. Earnings forecasts look steady. Peter Stephens has previously backed it.

Troubled waters

FTSE 250-listed oil services company Petrofac (LSE: PFC) trades 70% lower than it did five years ago and today’s results will do little to convince investors it’s on the mend. Its stock is up just 0.79% today after  full-year 2018 results showed revenues fell 8.9% to $5.8bn, while underlying profits dropped 2% at $353m.

The group did make a reported net profit of $64m after impairments and exceptional items, against a $29m loss in 2018. It can also boast a new order intake of $5bn, with a $9.6bn backlog at 31 December 2018. Net debt has been eliminated and net cash now stands at $90m. However, net profit fell 21% to $285m.

Fraud fear

Petrofac remains subject to an ongoing investigation into alleged bribery and corruption by the Serious Fraud Office, and this continues to cast a shadow over the business. Investors have no idea what to expect, but prospective clients could be wary, which may hit future orders. This is an added worry as orders have been shrinking. However, Roland Head says the threat has been factored into the price.

Positives include a forecast yield of 7.4% with cover of 2.2, and a valuation of 5.9 times forward earnings. However, earnings forecasts seems bumpy. I won’t be rushing to buy this one.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Merlin Entertainments. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.