FairFax Media Results : Still a dog, but getting better

Been running the ruler over the FairFax Media results which were released yesterday...still not great.

Big problems regarding the revenue at the moment, so much so that I think there is some earnings management going on.

Firstly, the 2012 revenues were restated 4% lower (from the original 2.3 billion to 2.1 billion). Secondly, they decided to change the circulation revenue reporting from net (with distribution costs included) to gross, with distribution costs in the Expenses. Not a good look. I think there is a fair bit of pressure for the company to meet their revenue targets.

I wonder why companies do this sort of earnings management, as it all is revealed in the cash flow anyway. Cash flow from operations dropped 30% over the year.

No joy in regards to making it's cost of capital. I calculated the cost of capital of Fairfax to be around 9% and that is not being hit at the moment. But most of this is already piced in.

Currently, I have a pice target of 63 cents a share, which is an improvement of the current 58 cents a share, by around 10%. Might be worth a buy and hold until it hits that price, but I don't see a major upside to this investment until revenue starts to improve.