Travel firm Go-Ahead Group (LSE: GOG) was one of the FTSEs top risers this morning, with a 90p (4%) rise to 2,363p in early trading.
In fact, its been a bit of a dark horse of late, with a 60% rise over the past 12 months and its up 80% over two years.
Successful year
Todays price hike was driven by the release of full-year results for the year ended 28 June, which the company described as a significant and successful year. So whats been going right for the rail and bus operator?
Profit before tax and exceptional items rose by 25% to 79.1m, with adjusted earnings per share (EPS) up 26%, in a year that saw record numbers of passengers in both the firms rail and bus operations presumably helped by Go-Aheads 92% customer satisfaction in its deregulated bus activities, the highest in the sector.
Another boost came from winning the UKs largest rail franchise, Thameslink, Southern and Great Northern.
Free cash
On top of that, and even though the company has increased its investment in its business, Go-Ahead was able to report strong free cash flow and upped its full-year dividend by 4.3% to 84.5p per share in line with progressive policy.
Chief executive David Brown sounded positively excited, telling us that the results were ahead of expectations, that the firm had reached the halfway point towards our bus operating profit target, and that he is confident in our ability to achieve 100m of bus operating profit by 2015-16.
Despite that soaring share price, the dividend still represents a 3.6% yield, which is comfortably ahead of the FTSE 100 average and if youd bought Go-Ahead shares a year ago at around 1,475p, youd actually have enjoyed a yield of 5.7% on the price you paid.
The shares arent on too stretching a P/E valuation either. The year did end on a P/E of 16, which is a bit above the FTSEs average of 14, but forecasts for June 2015 bring that down to 14 again. And thats based on an EPS rise of a modest 10% after todays results, my money would be on 2015 beating expectations again.
More to come?
With economic growth resuming, people do seem to be getting out and about again, which is clearly good news for the travel sector. And with that profit target that the company seems very confident of, Go-Ahead looks like one of the better ones to me Id say its been a bit of an overlooked star over the past couple of years, and still has plenty of potential.
Which other sectors than transport are benefiting from the recovery and where are the leading lights of the investing world actually putting their money? Take a look at where TMF’s top writers think The Smart Money Is Going.
There’s a variety of strong companies examined, which are growing their earnings and paying handsome dividends.
Just click here to get your hands on our experts’ thoughts today.
Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
