Should You Buy 4imprint Group plc Or Chime Communications plc?

4imprint Group (LSE: FOUR) released its half-year results today, which impressed the market. Indeed, as I write, the company’s shares have rallied more than 10% following the good news.

Specifically, 4imprint, a leading international direct marketer of promotional products, reported 14% year on year revenue growth, or 23% in constant currency. In addition, for the period earnings per share jumped by 34%, or 51% in constant currency and the company hiked its dividend payout by 11%.

Not so fast 

However, while these results do look impressive, investors should not rush to buy the company’s shares. Instead, it’s worth also taking a look at 4imprint’s larger peer, Chime Communications (LSE: CHW), which appears to offer better value for money. 

For example, despite lofty half-year results, City analysts only expect 4imprint’s earnings per share for full-year 2014 to expand by 3%. Unfortunately, this lacklustre growth rate implies that the company’s shares are expensive, as they currently trade at a forward P/E of 19.1.

In comparison, Chime Communications, one of the UK’s leading advertising agencies, is expected to report earnings per share growth of 36% this year.  Further, Chime’s shares currently trade at a forward P/E of 12.2, making them more than 50% cheaper than 4imprint. Chime also offers a 2.5% dividend yield.

Busy year 

It has been a busy year for Chime, although the company’s shares have fallen by around 3% year to date, trading has been strong. In particular, according to Chime’s trading update, released at the beginning of May, many of the company’s operating divisions are reporting double-digit operating income growth. Performance has been particularly impressive at Chime’s advertising and marketing division.

Chime has also benefitted from the summer of sport as the company has a large sports marketing arm. The group has benefitted from events such as the World Cup and the Commonwealth Games, as well as other events such as rugby, cricket and motorsports.

Moreover, Chime is also a possible takeover target. Specifically, the company’s largest shareholder, holding around one fifth of the group is media behemoth WPP. Headed by Sir Martin Sorrell, WPP has transformed itself into one of the world’s largest advertising agencies over the past few years, mainly through acquisitions. Rumours have been circling for some time now that Chime could be WPP’s next target.