The Go-Ahead Group plc (LSE:GOG), a transportation company based in United Kingdom, saw significant share price volatility over the past couple of months on the LSE, rising to the highs of £16.43 and falling to the lows of £13.69. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Go-Ahead Group’s current trading price of £13.76 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Go-Ahead Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. Check out our latest analysis for Go-Ahead Group
What is Go-Ahead Group worth?
Good news, investors! Go-Ahead Group is still a bargain right now. My valuation model shows that the intrinsic value for the stock is £23.63, but it is currently trading at UK£13.76 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, Go-Ahead Group’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Go-Ahead Group generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Go-Ahead Group, at least in the near future.
What this means for you:
Are you a shareholder? Although GOG is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to GOG, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping an eye on GOG for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.