Jim Evans, the president of Media General of Richmond, lunched with the Washington Society of Investment Analysts last week and gave the analysts a mixture of good news and bad news.

The bad news was that profits dipped 17.4 percent in 1985. The good news was that Media General believes profits will resume their upward track in 1986 and 1987.

Media General is a $578.5 million company with a finger in almost every communications pie. It publishes daily and weekly newspapers across the country, including the Richmond Times-Dispatch and the Richmond News Leader, the Tampa Tribune and the Winston-Salem Journal.

Media General operates television stations in Tampa and Jacksonville, Fla., and in Charleston, S.C., and is building the Fairfax County cable television system. It also is the third-largest U.S. producer of newsprint and has a variety of other businesses.

Once heavily dependent on its newsprint operations, Media General several years ago changed its strategy and expanded its newspaper and broadcast operations through acquisitions.

From 1978 to 1984, Media General's revenue, profits and earnings per share moved steadily upward. But in 1985, although revenue rose 5.6 percent, profits and earnings dropped more than 17 percent. The company cited three reasons:

The cost of construction of the Fairfax cable system.

Soft prices in the newsprint industry because of foreign imports.

The cost of reorganizing and rebuilding the Broadcast Services division, which acquires broadcast time for resale to advertisers and their agencies. Formerly the William B. Tanner Co., it was acquired by Media General in 1982. Tanner later pleaded guilty to federal tax-evasion and mail-fraud charges in a kickback scheme. Media General has filed $275 million in damage suits against Tanner, auditors Touche Ross & Co. and others.

The company, meanwhile, bought new presses, built new television transmission towers and acquired a 40 percent interest in Garden State Newspapers, a company set up to acquire medium-size daily newspapers.

All in all, the company said, 1985 was a transition year, and Media General "will again be positioned for improved earnings with emphasis on long-term growth objectives."

A key factor in Media General's future financial health will be the completion of the Fairfax cable system, which is expected to generate $20 million a year by the end of 1987. The cost of building the system -- originally estimated to be $125 million -- will be closer to $200 million.

The system has 107,000 subscribers, who each pay an average of $26 a month, and the company expects to add 23,000 subscribers by the end of 1986. The firm's cables are expected to run past 223,000 Fairfax homes.

Fairfax subscribers, incidentally, can expect a rate increase early next year, Jim Evans told the analysts, although he would not say how much of one. The increase will not be a surprise. When the cable franchise was granted, it was agreed that rates would be frozen for four years.

Media General is pinning some of its hopes for profits on the performance of its newspapers and television stations. The company expects dramatic results in the Tampa Bay metropolitan area, where the population is expected to reach 2 million by 1990 and 2.4 million by the year 2000.

While Media General has been trying to reverse the dip in its profits, the price of its stock has continued to rise -- in part because of the widespread increase in the valuation of many media properties.

Selling at $79.50 a share on Jan. 1, the stock closed at $96 on May 27, an increase of 21 percent. The average increase among nine other major media companies was 33 percent, according to a recent study by analyst George F. Shipp of the Investment Corporation of Virginia in Richmond.

Shipp took a look at the prices paid recently for newspaper and TV properties and concluded that he had been too conservative when he estimated that Media General's properties were worth $133 a share. Taking another look at the company, he boosted his estimate to $186.24 a share.

"The average newspaper publishing equity trades at a 30 percent to 35 percent discount to the private market value," said Shipp. "Thus, we are raising our near-term target for Media General shares to $121 to $130."

Shipp, who predicts an earnings pickup in the second half of this year, is carrying an estimate of $4.80 a share for 1986, as compared with $4.61 a share for 1985. He thinks the company will earn $5.85 a share in 1987 and advises investors to accumulate Media General stock.

This optimistic view of Media General's future is shared by Charles T. Akre Jr., research director of Johnston, Lemon & Co. Akre says Media General has "always been a company with pretty significant opportunities." He is especially impressed with the impact that completion of the Fairfax cable system will have on Media General's bottom line.

Akre said he recommended the stock in January at $76 but put it on "hold" after it had risen nicely. Indeed, he now thinks he might have put it on "hold" too soon. "I'm astonished at the performance of the stock," he said.

Media General shares closed Friday at $97.50 a share. That was 21 times its 1985 earnings, somewhat ahead of the price-earnings ratio of 16 for the Standard & Poor's 500.

It's pure speculation, of course, but the speculator knows the subject well enough to make his scenario worth thinking about. It concerns Riggs National Bank, which has taken its first step across the District line by buying the Guaranty Bank and Trust Co. of Fairfax for $37.8 million. A relatively small bank, Guaranty has five branches and assets of $128 million. The importance of the transaction, of course, is that it gives Riggs a foot in the Virginia suburbs.

But watch the next move, our speculator says. If Riggs follows up by buying a small bank in Maryland, it might mean Riggs wants to sell out, and will be able to offer a purchaser banking privileges in all three jurisdictions. If, on the other hand, Riggs buys a large bank in Maryland, it might be a signal that Riggs plans to stick to its announced plan to remain independent and expand its business throughout the Washington area.

Analyst Joel H. Krasner of Dean Witter has reduced his earnings estimate on Black & Decker Co. of Towson, Md., for the September 1986 fiscal year to 70 cents a share from 90 cents a share. B&D lost $3.11 in its 1985 fiscal year. "It appears the improvement in orders that we expected . . . has yet to materialize," he said. "Assuming a recovery in retail sales and inventory rebuilding by retailers in 1987, coupled with restructuring cost savings, B&D earnings could double in fiscal 1987. We do not expect much downside risk exists in the stock price at this time about $20 because of continued speculation concerning a takeover."

Washington Homes of Waldorf, Md., one of the year's high-flying stocks (up 120 percent), will offer $50 million in 20-year convertible subordinated debentures. The issue has not yet been priced. Thomson, McKinnon Securities is the underwriter. . . . Dynalectron Corp. of McLean, Va., has converted $14 million of its 9.5 percent debentures into 1.1 million shares of stock at a rate of $12.22 a share. The stock closed June 18 at $17.75. . . . Ryland Group Inc. of Columbia, Md., will split its stock 2-for-1 on July 30 for stockholders of record July 15. . . . The Rouse Co. of Columbia has closed its 100 million Eurodollar convertible subordinated debenture issue. The 10-year bonds carry a 5.875 percent interest rate and are convertible to Rouse shares at $39.375.

The Investment Company Institute, the organization that represents mutual funds, has published an 80-page "Guide to Mutual Funds" that lists 1,461 mutual funds and contains a wealth of information on the workings of mutual funds. The guide is available for $1 from the Investment Company Institute, Post Office Box 66140, Washington, D.C. 20035-6140. Allow three weeks for delivery.