When I bought shares of FTSE 250 coach operator National Express last year, it was an exercise in patience. That is, until the stock market rally lifted fortunes across more than one UK share. It also showed that coronavirus-impacted travel stocks can rise significantly.
Go-Ahead Group: a fast-rising UK share
One such is the Go-Ahead Group (LSE: GOG), which was a big gainer yesterday. Its share price was up 4.5% over the previous close.
And this is after the stock is up almost three times from its lowest point in last year’s crash. This makes it a standout stock for me. Even though many stocks have seen a strong bounce-back in the past year, few that I’ve covered here have risen as much.
Moreover, I think there’s reason to believe that more share price increases for this UK share are possible, not just now but also in the long term. Here are three reasons why.
3 reasons why it might rise further
#1. Resilient results: The latest share price increase followed GOG’s half-year results for the six-months ending January 2 2021. The bus and rail operator saw a rise in revenues of 3.1% compared to the year before, despite the fact that its services were disrupted for much of the time. Further, it remained profitable too, even though its profits were impacted.
#2. Better days ahead: There’s something to note as far as its profits are concerned, which leads me to the second reason its share price could rise further. GOG has actually increased its expectations for 2021 numbers based on increased profitability of its London and international operations. Further, at a time like this when there’s pent-up demand for travel, I reckon that GOG could see revenue growth too.
#3 Diversification: I like its diversified operations across Singapore, Germany, Ireland, Norway and the UK. This means that barring a global crisis, like Covid-19, the company’s revenue risks are somewhat mitigated if there are economic challenges in one country. Even though right now most of its revenue comes from the UK, I think diversification also offers more growth sources in the long term.
Risks to note
That said, I think the risks are important to recognise here. Since the company’s revenues come from primarily the UK, until there’s greater development of revenue streams from other markets, it does remain vulnerable to any fluctuation here.
Moreover, the Brexit risk remains a threat. While an EU-UK trade deal is in place now, availability of spare parts and any potential changes in its operations in EU markets can happen. And in addition to this, a regulatory focus on clean air is a potential risk for it too.
All in all though, I’m bullish on the stock. But as is the case for NEX too, appreciable capital gains may take time to accrue for this UK share.
