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Supported by fast enlargement, earnings at Greggs (LSE:GRG) have rocketed over the previous decade, which in flip has pushed its shares by way of the roof.
At £21.20 per share, Greggs’ shares are 154% costlier than they have been 10 years in the past.
However is the FTSE 250 baker nonetheless among the best development shares to contemplate shopping for right this moment?
Progress forecasts
From a short-term perspective, maybe not. Analysts anticipate annual earnings development to halve this 12 months earlier than choosing as much as improved single-digit percentages in 2026:
| 12 months | Earnings per share | Earnings development | Worth-to-earnings (P/E) ratio |
|---|---|---|---|
| 2024 | 134.74p | 8% | 15.9 instances |
| 2025 | 139.49p | 4% | 15.3 instances |
| 2026 | 150.96p | 8% | 14.2 instances |
There are many different mid-cap UK shares tipped to offer higher earnings development over the subsequent two years.
The anticipated development drop for 2025 isn’t that shocking given current buying and selling. Brokers have been downgrading forecasts following information on 9 January that revenues rose ‘simply’ 7.7% within the closing quarter.
This was down from 10.6% in quarter three, and 13.8% within the first half.
Like-for-like gross sales, in the meantime, slowed to a crawl in quarter 4. They rose simply 2.5%, down sharply from 5% within the prior three months.
Fears rising
Buying and selling clearly hasn’t been catastrophic, although. Final 12 months, gross sales moved by way of the £2bn landmark for the primary time, with revenues rising even because the cost-of-living disaster dragged on. This isn’t the primary time Greggs has delivered development regardless of robust financial situations.
But it’s additionally attainable to know why the market’s been underwhelmed by current numbers. The corporate’s deal with low-cost meals retail means such resilience is already baked (no pun supposed) into traders’ expectations.
As a substitute, Greggs’ current gross sales numbers have ignited considerations over whether or not the agency’s development methods — like better night buying and selling, menu refreshments, and extra Click on and Acquire — could possibly be working out of steam.
What subsequent?
Given the robust financial outlook, I wouldn’t be stunned if Greggs gross sales disappoint a bit longer, placing recent stress on its share value.
However my view is that the baker’s development outlook stays sturdy over the long run. It’s why I’ve taken benefit of current value weak point to purchase extra of its shares for my very own portfolio.
New retailer openings have been the bedrock of Greggs’ hovering earnings lately. And encouragingly, it sees additional scope for extra vital enlargement.
The agency’s added round 1,000 shops to its nationwide community for the reason that mid-2010s. It plans to chop the ribbon on one other 800, taking the full to three,500. What’s extra, the baker plans to ramp up retailer openings in profitable journey locations resembling airports and rail stations.
Additional enlargement can be supported by funding in new distribution and manufacturing websites. Final 12 months, it introduced new amenities in Derby and Kettering, scheduled to open in 2026 and 2027, respectively. There’s execution danger right here, however Greggs’ robust file on this entrance ought to assist soothe traders’ fears.
I’m additionally assured that Greggs’ enhanced supply and digital companies and longer retailer opening hours will assist gentle a fireplace below long-term earnings development.
Consequently, I nonetheless suppose Greggs stays a prime development share for traders to contemplate shopping for, regardless of the corporate’s present troubles.
