Go-Ahead Group has crashed 20% today! Would I buy it?

This UK stock looked quite promising at the start of the year, but its fortunes have turned, culminating into a 20% price fall today! 

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The nature of the stock markets is such that we never know what is coming around the bend. There could be a boom or a bust in the broad stock markets as a result of unexpected occurrences. Or there could be changes to an individual company’s prospects, for better or for worse. The UK stock I am referring to today, is the latter kind. Transport operator Go-Ahead Group (LSE: GOG) has had an awful start to the day. Its share price is down by almost 20% as I write!

Long-drawn out concerns

But its share price troubles are hardly restricted to today. It has also had an awful six months. Its share price has fallen by 54% as I write. I could take into account the fact that a number of stocks have lost at least some of their value gains since the stock market rally that started in November last year. But I still cannot overlook the fact that even over the past year, the stock is down by some 43%. 

And in fact, going by the latest developments related to it, I reckon there could be some more pain in store. The company has just said that it would be unable to release its results in time, which would lead to a suspension in trading in its stock from 4 January 2022. It does hope to release its numbers by the end of the month, which could restart trading.  

What’s going on with the Go-Ahead Group share price?

Disappointing as this situation is, I would be less concerned about this aspect if the underlying trigger was not quite as serious as it is. Its franchise, London & South Eastern Railway Ltd (LSER), failed to inform the Department of Transport about overpayment of some monies. The department has now taken over the delivery of services from this franchise, and LSER’s contract has not been renewed.

As a potential investor in the stock, I think this could have long-term consequences for the company, in terms of reputational damage. It would anyway miss out on some revenues now and its future revenue stream could also be reduced. This only adds to the struggles faced by travel-related companies during the pandemic, which is not exactly over. 

My assessment of the UK stock

I do not think that the stock is a total write-off though. In fact, I quite liked it before this current fiasco. And it is just a matter of chance that I did not end up buying the stock earlier in the year. I do believe that in time, it could find itself in favour again. And I mean the favour of both the authorities from which it gets business and of investors. But for now, I am not holding my breath. I will watch developments pertaining to it, and I think it will be a few months before I know better where the stock is at. I will take an investment decision on it then.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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