Is the Go-ahead share price good value?
Mid cap Passenger Transportation operator Go-ahead's (LON:GOG) shares have rerated recently, rising by around 25% since the start of 2019:
Despite the rise, the group still looks cheap according to several popular relative valuation metrics. One of the clearest ways to see this is with Stockopedia’s Value Rank, which is made up of the following simple valuation ratios:
- Price to Book Value
- Price to Earnings
- Price to Free Cash Flow
- Dividend Yield %
- Price to Sales
- Earnings Yield %
How does Go-ahead stack up?
Go-ahead's Value Rank
We can see by using Go-ahead’s StockReport that the group has a:
- Rolling price to book value of 3.34,
- Rolling price to earnings ratio of 11.2
- Trailing twelve-month price to free cash flow of 8.84
- Rolling dividend yield of 5.35%
- Trailing twelve-month price to sales ratio of 0.23
When we add all of these together, we find that Go-ahead has a Value Rank of 78. Investing in high-value stocks requires finesse and a sturdy constitution but, when cheap stocks come good, the payoff can be large and sudden.
Go-ahead’s Value Rank of 78 puts it in the cheapest quartile of the stock market. That is certainly a promising jumping off point for our analysis but it is not the whole story.
What does this mean for potential investors?
Some of the best quality stocks in the market have defensible models that can deliver high levels of shareholder returns over the long term. But there are no guarantees and it's important to do your own research. Indeed, we've identified some areas of concern with Go-Ahead that you can find out about here.
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