The combination of price inflation and the low-growth environment hasn’t been kind to my investment portfolio of late. With the Bank of England now forecasting a recession by the end of this year, prospects for growth in my portfolio’s value may have slimmed down dramatically.

Yet being a long-term investor, I stand firm on my long-term portfolio bets. But it doesn’t mean I can’t consider other approaches. Today, I’m scouting for momentum stocks with room to generate further growth in the current environment.

The best-performing UK stock this year

One FTSE All-Share company has found growth easy to come by this year — Go-Ahead Group (LSE:GOG). The transport company has been the fastest growing UK stock so far.

Over the last six months alone its share price has increased by 130%. This is a dream for an investor like me.

The company took a big hit during the pandemic when non-essential travel came to a halt. But as demand for domestic travel has risen, so too has the share price.

And I believe it’s still a top FTSE share to buy. Although the recent bull run could suggest the stock’s no longer a bargain, I’ll explain why I think there’s more room for growth.

Room for growth?

Go-Ahead’s footfall remains below pre-pandemic levels. Yet in the outlook section of its latest results report, the company said it expects its regional bus operations to deliver operating profit above that of the prior two years. This seemed rather bullish to me.

Earnings are also forecast to grow by nearly half (42.6%) year on year and the company looks undervalued compared to its peers (with a price-to-sales ratio of 0.2 times vs its peer average of 0.4 times). I view these factors as strong signs of growth potential.

The current price of the shares (around £1,540) is still way off the pre-pandemic high (£2,262). So they still have a long way to go until a full recovery.

As an investor focused on capital growth, that’s music to my ears.

The bull run can continue

I’m not a herd investor who follows trends. I find undervalued companies that can generate capital growth for my portfolio. The Go-Ahead Group is a UK stock I believe was sold off prematurely during the height of the pandemic.

In fairness, we didn’t know how long it would take to get back to normal life. Now normality is closer, I’m confident the company’s share price can continue to benefit. I’m not the only one either. The combination of long-term favourable trends, recovering share prices, and a weak pound, are also attracting foreign buyers. This is a huge factor that can stimulate the share price further.

For example, John Menzies — another UK stock and company with exposure to domestic transport — is the only other to have grown more than 100% in value this year. The rise followed news of a foreign acquisition. Similar rumours are emerging regarding Go-Ahead Group.

These are just some of the reasons why I’ll be buying some shares to add to my Stocks and Shares ISA portfolio this month.

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.

The collapse of the Go-Ahead share price

Since the privatisation of the UK rail networks in the 1990s, companies have been able to bid for a franchise to provide passenger transportation. And for a long time, Go-Ahead was responsible for around 30% of all journeys across the UK through its Govia Thameslink Railway (GTR) and Southeastern lines.

Yesterday, the government announced it would be taking control of the Southeastern railway services. An investigation uncovered the firm hadn’t declared £25m of taxpayer funding that should have been returned in 2014. This is a breach of contract, and consequently, Go-Ahead will no longer be operating Southeastern services as of 18 October.

Needless to say, that’s not good news, especially since Southeastern generated 26.8% of revenues last year. In other words, a quarter of the firm’s revenues are about to evaporate. And after 13 years of service, CFO Elodie Brian has resigned with immediate effect on the back of this scandal. With fears of the Serious Fraud Office potentially stepping in, seeing the Go-Ahead share price crash is hardly surprising.

What now?

As damaging as this situation is, it’s certainly not the end of the world. The company still has other rail operations to drive revenues, such as the previously mentioned GTR line, as well as its German and Nordic ventures.

Meanwhile, its Bus transport activities remain entirely unaffected. And according to the latest trading update, passenger volumes are recovering quickly. In fact, they have reached the highest point since the start of the pandemic. This is especially encouraging since these activities are responsible for 88% of the group’s operating profits. After all, the margins on a bus transportation network versus rail are significantly higher.

There is undoubtedly going to be a noticeable impact by the loss of the franchise. However, it might not be as bad as investors are currently anticipating when looking at profits. So, if it can scale up its bus operations, the Go-Ahead share price might still be poised for high growth moving forward.

The bottom line

It’s difficult to judge the direct impact of this situation without some solid numbers to look at. But the company has postponed the release of its 2021 annual results that were originally scheduled to come out tomorrow.

The Go-Ahead share price may be able to recover and climb higher over the long term. But for now, I’m going to keep it on my watch list until more information is available.

The company told us that the Department for Transport (DfT) “has chosen to appoint the Operator of Last Resort to take over delivery of passenger services on the Southeastern franchise from 18 October 2021, when our existing agreement expires.”

Back in August, Go-Ahead announced a delay to the release of results for the year ended 3 July 2021. The firm told us it “reflects ongoing discussions with the Department for Transport regarding the historic calculation of the Southeastern profit share over a number of years.”

Potential financial penalty

With the latest news, the date is being put back further. Provisionally expected on 30 September, the new date has yet to be announced. Go-Ahead told us, rather ominously, that the “results for the year ended 3 July 2021 (including the expected provisions related to the matters under discussion with the DfT but excluding any potential financial penalty) remain in line with the Board’s expectations.”

What are the details? The government puts its action down to a “a serious breach of good faith” on the part of Go-Ahead. Transport secretary Grant Shapps said that the company had failed to make £25m in historical payments due to the DfT.

Go-Ahead says it has now repaid that £25m. But things appear to be far from resolved. According to a Transport Select Committee quote given to the BBC, there’s a possibility that the Serious Fraud Office will become involved. That “potential financial penalty” spoken of by the company might have me a little worried were I a shareholder right now.

Debt and profits

We’ve seen the immediate effect on the Go-Ahead share price. But the big question is, what difference does this really make to the company as an investment possibility? Well, it wasn’t the solo owner of the Southeastern franchise. No, that was run by a joint venture between Go-Ahead and Keolis. So we’ll have to wait to discover where the finger of blame eventually points.

The pandemic hit Go-Ahead hard. But the interim debt situation didn’t look bad. An adjusted net-debt-to-EBITDA figure of 1.87x was well within its target of 1.5x to 2.5x. I in the circumstances, I think that’s fine.

The company’s profit breakdown is telling too. It posted an adjusted H1 operating profit of £56.1m. Of that, only a relatively small £6.5m came from rail operations, with the rest from bus services. Rail operations disproportionately suffered from travel restrictions, but we’re still looking at a relatively small portion of Go-Ahead’s business.

Go-Ahead share price future?

Perhaps ironically, I reckon Go-Ahead was looking like a decent prospect for a recovery investment prior to this bombshell. And I think I would have been tempted to buy had I examined it earlier.

Has the market overreacted? Will the Go-Ahead share price pull ahead over the next 12 months? With my dislike for risk, I will await the resolution of the latest unknowns before I decide.

Not even the release of bright financials on Thursday helped the Go-Ahead share price spring out of this downtrend. It rose fractionally to close the session a shade below £12.

Passenger numbers climb

In a trading update for the financial year to July 3 Go-Ahead said it has enjoyed “robust trading performance” across all of its divisions. Passenger numbers at its Regional Bus division are at their highest since the Covid-19 outbreak in early 2020. They are currently running at between 65% and 70% of pre-pandemic levels.

Go-Ahead said that the high number of people using its regional bus services since Covid-19 restrictions began easing reflects “the pent-up demand for leisure, retail and general social contact”. It added that traveller volumes are in excess of 80% of usual levels in some regions.

Strength elsewhere

In other news, Go-Ahead increased its full-year expectations for the London & International bus division. The unit will benefit from a one-off payment linked to Quality Incentive Contract agreements in London, the company said, while lower-than-forecast levels of sickness and expectations-beating staff retention levels have also boosted performance. Elsewhere, its Singaporean business will benefit from Covid-19-related government receipts.

Elsewhere, Go-Ahead said discussions regarding its Southeastern and GTR rail franchises have begun with the Department for Transport. News on contracts that are due to end this year is expected in the autumn. Go-Ahead said that it still predicts its Rail division will break even during this outgoing year.

The transport operator added that its balance sheet is strong and that cash generation is ahead of previous forecasts. It now expects leverage “to be towards the bottom end of the 1.5 to 2.5 times target range”.

Time to buy Go-Ahead?

Go-Ahead commented that “our priority over the coming months is helping passengers return to our services and welcoming new passengers who may be looking for a greener, value-for-money travel choice”. It added that the board continues to work towards paying a dividend “at an appropriate level” for financial 2021.

There’s clearly a lot of uncertainty facing Go-Ahead in the near term and beyond. Resurgent coronavirus cases in the UK are one problem, while the future for its rail franchises is a more enduring thorn in the side. The small-cap provides essential services for many people across the world, though. And this could still deliver big returns in the years ahead. But I won’t be buying Go-Ahead for my investment portfolio as the risks are far too high for my liking.

The first is DFS Furniture (LSE: DFS), which among all three has reported the sharpest uptick and seen big share price gains. Next, is the Go-Ahead Group (LSE: GOG), which delivered a mixed update and saw an almost unchanged share price. Last, is the greeting card retailer Card Factory (LSE: CARD), that investors have given a thumbs down to today.

To assess whether to buy them for the long term or not, however, I looked at their stories in a little more detail. Here is what I think

#1. DFS Furniture: I’d buy on a dip

The retailer actually expects to earn profits in its current financial year ending June 27. This is the standout feature for me in its latest trading update. As we know well, the last year has been awful for retailers. A slew of companies have gone under. That DFS Furniture has actually managed to not just survive, but actually thrive in this environment is a huge win, in my view.

It has been rewarded by investors too. Its share price is up a big 12% today following its update, reaching multi-year highs of 304p. This brings its annual price rise up to 78% now. I reckon this year could be even better for the company as the economy comes back to life. I would buy it on a dip, since it has run up quite a bit.  

#2. Go-Ahead Group: reopening incomplete

FTSE 250 travel company, Go-Ahead Group also released a somewhat positive trading update for the year due to end in July. Passenger numbers are the highest since the pandemic, but they are still less than they were pre-pandemic. I reckon this can change over time though as we start travelling with greater confidence and fewer restrictions. Only then will travel stocks have truly reopened. 

Another challenge here is that some of its rail contracts are approaching their end. It is in discussions for new contracts, but I do not know if they will come through and what they will be like. I think this makes its situation a bit more uncertain.

Investors have responded little to the update. Its share price is almost flat from yesterday, although it is still up around 7% over the year. But as the pandemic recedes, I reckon that it can do better. It has been a buy for me and I maintain that position. 

#3. Card factory: Wait and watch

Card Factory is down almost 4% so far after it released results for the year ending January 31. The numbers were predictably bad, considering the lockdown. 

But I found the post-reopening update disappointing. It said that the initial surge in demand has subsided after the pent-up demand was met. Still, I think there is potential in the stock going by its robust online performance and an improved consumer demand outlook. Its share price is still up 42% from a year ago. Just to be sure, though, I will wait for another update before buying the stock. 

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. 

A rising digital advertising powerhouse

After Sir Martin Sorrell left WPP, which he had grown from a shell company to an advertising giant, he set out to do the same thing again.

But, as he had already seen at WPP, the world was changing. Clients wanted digital first strategies and data was becoming increasingly valuable. Freed from his legacy operation, Sir Martin was able to put this into practice by building an entirely new type of digital media agency embedding those principles. His growth strategy of acquisitions had worked at WPP and he kept that while jettisoning old practices which had outlived their utility.

The result is S4 Capital. It’s no secret that I think this holding has growth potential – in fact I picked it as my top British share for 2021. But it’s had a rough few weeks. It’s down almost 15% since the start of the year, albeit that still puts it at a price more than double where it sat a year ago.

I’m unclear why the price of these UK shares has fallen. It could be as part of the wider tech pullback, or because no new acquisition has been announced for a few weeks and the market expects a constant deal stream. It could also be that other investors, like me, were unsettled to see the first share sales by directors last month.

Whatever the reason, I retain confidence in the story. S4 is the only listed company I know whose public three-year vision is to double revenues and profits organically. Digital advertising is a fast growing space and Sir Martin’s hand on the tiller inspires my confidence. From its lower price, I think it could double in coming years.

These UK shares

Shares in transport operator Go-Ahead have doubled since October. Could they do it again in the next several years?

The return of train and bus passengers as lockdowns lift should help revenue somewhat, although the recent price increase suggests that some of that is already in the share price. But Go-Ahead is in the fortunate position that most of its revenue is guaranteed, even if passenger numbers are low. In fact, 90% of Go-Ahead revenues come from contracts with no revenue risk from shifts in passenger demand.

Until the pandemic struck, the company’s dividend was just over a pound a year. At the current share price, that would suggest a yield of 8.5% if dividends resume at the same level. Dividends have not restarted yet and when they do, reduced passenger demand could lead the company to adopt a cautious level and pay out less than before.

But if dividends do come back at the same level, the high yield looks very tasty. I would expect it to bring in more investors, which with higher passenger demand could push these UK shares up to where they sat before the pandemic, almost double where they are now. From there, it’s a short step to doubling from today’s price.

Too risky or a Foolish buy?

A stock like GOG could be seen as a contrarian buy right now. This is because the travel and tourism sector has been massively affected by Covid-19. Government lockdowns across this and many other countries have impacted customer numbers on bus, rail, and air travel services.

I believe that essential journeys on bus and rail services to get to work and school will continue to rise. In addition to that, non-drivers will still need modes of transport to travel. Air travel will still be affected as I see international travel for holidays as a luxury trip at the moment. The government is wary of stimulating the economy and attempting to get the public out and about once more and ultimately this will benefit GOG and other essential transport providers out there. 

In addition to this, a Rail Safety and Standards Board study conducted recently found there was less than a 0.01% risk of infection from an hour-long journey in a train carriage. This was even without passengers wearing face coverings.

Recent performance

When the market first crashed, GOG lost nearly 80% of its share price value. Between mid-February and its lowest point a month later, share prices fell from 2,210p per share to a lowly 473p. As I write this, shares can be picked up at just under 590p per share, which is a bargain in my opinion.

At the end of September, GOG released its full-year results. As expected the pandemic had affected its business. That being said, it seems the regional bus arm of the business was mostly affected whereas its rail operations remained resilient which is pleasing to see from an investment perspective.

Overall group revenue increased by close to 6%. In the UK regional bus market, revenue was down to £408.8m compared to the previous year of £433m. GOG’s London and International Bus services and Rail business were up 6% and 8% respectively. GOG did turn over a profit of £77m; however, this was down compared to the £121m in 2019. Net cash increased a huge 376% compared to the previous year, which shows the business has good liquidity.

A stock you should buy for the long term

I think GOG presents a good opportunity as a long-term stock at a bargain price of nearly 590p per share. At the time of writing, 90% of Go Ahead Group’s business is operating under contracts that did not rely on passenger revenues to be profitable.

I feel the international reach of the business will continue to keep GOG profitable. It has shown good resilience in the face of unprecedented market conditions. It has a good level of liquidity to fight off any further travel restrictions in my opinion too. I would seriously consider this stock for a long-term buy and hold strategy. I envisage rail and bus travel to continue to rise over time and normalise somewhat.

Many investors prefer looking at the FTSE 250 to find growth shares, rather than its bigger sibling, the FTSE 100. The theory is, smaller companies have the capacity to expand at a higher rate. As famed small-cap investor Jim Slater said: “Elephants don’t gallop.”

So here’s a bargain FTSE 250 company I think could be one of the best growth shares to buy now.

Go-Ahead Group

The Go-Ahead Group (LSE: GOG) share price has fallen by 64% in the year-to-date. In fact, its plummeting stock price goes back further, with a drop of 69% in the past five years. However, just because a share price is cheap, doesn’t mean it’s a bargain.

Why do I think the company’s shares could be a great buy? I’ve grown fond of transport companies lately. This might seem odd to some investors, who’ve seen various aviation brands on the brink of collapse. However, I think companies like Go-Ahead might be slightly different. The business is one of the UK’s leading public transport companies via its bus and rail networks.

Best FTSE 250 share to buy right now?

Although it’s up for debate whether customers will return to air travel, in light of the coronavirus outbreak, I think more localised travel by bus and rail is the unavoidable reality for some. Pre-coronavirus crisis, 60% of public transport journeys were by bus, with 2m people carried on Go-Ahead’s network each day.

Over the course of a year, 1bn people used Go-Ahead services each year. For some, bus and rail travel is completely necessary, whereas air travel might be viewed more as a lifestyle choice.

Meanwhile, I believe the market is pricing this FTSE 250 share unfairly. Go-Ahead Group’s shares are now trading at a price-to-earnings ratio of just 5.

In a trading update for the year ending 27 June, Go-Ahead Group said that in recent weeks its mileage for regional busses was between 40% and 50% of normal scheduled levels. However, passenger numbers were at roughly 10% of usual levels. This shifted the balance between revenue and expenditure. Thankfully, the business received some support from the Department for Transport. The group has good liquidity and has no debt maturities ahead of 2024.

The business is looking to cut costs and freeze capital expenditure where possible. The company had previously guided full-year capital expenditure to be roughly £140m. This is now expected to be closer to £90m. Measures taken to reduce expenditure include leasing new vehicles where appropriate, rather than buying them.

Meanwhile, the FTSE 250 company’s interim dividend payment of 30.17p per share has been suspended. The suspension of dividends might upset some shareholders but, in these times, I’d rather own shares in a company that takes these prudent steps in order to maintain good liquidity.

When it comes to FTSE 250 bargains, I think that Go-Ahead shares tick the boxes. I rate it as one of the index’s best shares at the moment and a good one to buy now.