Picture supply: Getty Photos
Fast earnings progress over the past decade has seen the worth of Greggs‘ (LSE:GRG) shares explode over the past decade.
Somebody who invested £10,000 within the FTSE 250 baker again in mid-April 2015 would have seen the worth of their shares rise to £15,999. Over the interval, its share worth has leapt from £11.33 to £18.15 at the moment.
When additionally factoring in dividends, an investor would have made a cumulative revenue of £10,157. That represents a complete shareholder return of 101.6%.
However stormclouds have gathered over Greggs extra not too long ago, and its share worth has fallen sharply from 2024’s closing excessive of £31.84 reached in September.
Ought to traders at the moment take into account grabbing a slice of the sausage roll maker? Or is the corporate previous its best-before date?
Growth continues
Greggs’ story for many of the previous decade has been considered one of aggressive growth and a subsequent surge in earnings. From having 1,650 shops simply over 10 years in the past, the enterprise now has 2,618 (comprising 2,057 company-managed shops and 561 franchised models).
Having discovered the appropriate recipe for earnings progress, the corporate, maybe unsurprisingly, has no plans to backtrack. New retailer openings hit a yearly document in 2024, and Greggs plans to have “considerably greater than 3,000 retailers” in its portfolio over the long run.
It’s investing huge sums in manufacturing and distribution to make this a actuality too. The truth is, the enterprise believes two new websites in Derby and Kettering — slated to open in 2026 and 2027 respectively — will present sufficient capability for some 3,500 retailers.
Encouragingly, Greggs plans to website a better variety of its new shops in high-traffic locations too, reflecting its pivot away from the excessive avenue. Extra particularly, it plans to centre future growth in direction of journey locations comparable to airports and practice stations.
The agency’s gearing as much as additional prolong opening hours throughout its retailer property too, to seize the profitable night ‘meals to go’ market. Greggs additionally has plans to maintain investing in its supply channel following current spectacular buying and selling. Supply revenues grew by a formidable 30.9% in 2024, regardless of the robust buying and selling surroundings.
27.6% rebound?
I’m hoping that these elements will assist Greggs’ share bounce again following current heavy dips. Encouragingly, the dozen analysts with rankings on the inventory count on costs to rebound over the subsequent 12 months, although forecasts aren’t uniformly bullish.
One particularly enthusiastic dealer issues Greggs shares will surge from £18.15 at the moment to £32.50 within the subsequent 12 months. On the different finish of the size, one other analysts reckons the baker will drop all the way in which again to £13.30.
The common worth goal nonetheless, sits at £23.16. That represents a 27.6% rise from present ranges.
Are Greggs shares a purchase?
On stability, I feel Greggs shares are value severe consideration following current share worth weak spot. It now trades on an affordable price-to-earnings (P/E) ratio of 13.3 occasions.
It’s true that buying and selling circumstances might stay difficult within the close to time period as shopper spending stays constrained. It additionally faces important competitors on the excessive avenue and elsewhere.
Reflecting these pressures, like-for-like gross sales progress at Greggs cooled to five.5% in 2024 from 13.7% a yr earlier. Nevertheless, my long-term view of the bakery chain is undimmed. I consider Greggs’ share worth will rebound sharply when broader financial circumstances enhance.
