Fairfax Media Limited (ASX: FXJ) shares have caught an updraught in 2014 to hit multi-year highs at $1.03 and return more than 60% to investors for the year to date. It's now trading on around 17 times analysts' forecasts for earnings of 6.1 cents per share for the 2014 financial year.
Driving the market's optimism is the commitment to operational cost savings demonstrated through staff redundancies, and the accelerating growth of the company's Domain property website business. For the first half of 2014 Domain grew revenues and earnings 33% to deliver $29.4 million in EBITA .
The potential of Domain to challenge number-one property listings website realestate.com.au owned by REA Group Limited (ASX: REA) is plain to see. REA Group posted EBITDA of $106.8 million for the equivalent period and Fairfax may have found a digital competitor to help build a new estate with Domain a key performer. Of course much of the digital traffic to Domain will be via Fairfax's other digital publications so their success remains the keystone to building any new estate.
Overall it seems the Fairfax show might be back on the road if it sticks to the script of cutting costs and growing digital revenues. Investors seem to be coming round to that way of thinking and the business may be offering excellent value yet if they're proven correct.
