Down 43% regardless of strong outcomes, is that this FTSE 250 fast-food favorite a serious cut price at its present sub-£17 worth?

Picture supply: Getty Photographs

FTSE 250 purveyor of baked meals Greggs (LSE: GRG) has seen its share worth rise 5% from 1 October. This uptick might be a welcome aid for shareholders, following a powerful bearish development within the inventory this yr.

The rise follows a reiteration of its earlier full-year steering in its Q3 outcomes on the day.

Like-for-like (LFL) gross sales elevated 1.5% in Q3 yr on yr. Though constructive, that is down from Q3 2024’s year-on-year improve of 5%.

LFL gross sales measure a retail enterprise’s progress from its present shops and area, excluding new retailer openings or closures.

The corporate attributed this slide to unusually excessive temperatures all through July. The issue with this as an evidence is that the world is constant to warmth up, so what occurs subsequent yr?

Except for this, I believe a key danger for the enterprise is any additional surge within the cost-of-living. This might cut back shopper spending going ahead.

What’s the outlook?

On the constructive facet of the Q3 outcomes, Greggs continues to reinforce purchasing comfort for its clients. That is being accomplished by new retailer openings and distribution tie-ups with supermarkets.

On the previous, it expects round 120 internet store openings general this yr, with 57 having been opened up to now in 2025.

On the latter, its ‘Bake at Home’ vary is in 930 Iceland and 820 Tesco shops and on the web websites.

Consequently, regardless of the declining year-on-year price of gross sales progress seen in Q3, Greggs reiterated its earlier efficiency steering for the complete yr. That is that 2025’s working revenue might be “moderately lower” than the £195m recorded in 2024.

Having stated all of this, the shares are nonetheless 43% decrease than their 21 October one-year traded excessive of £29.34.

So, how does the worth proposition at the moment look?

Is there a price-to-valuation hole?

A share’s worth is regardless of the market can pay for it at any given second, however its worth displays the true price of the underlying enterprise fundamentals.

Figuring out this and with the ability to quantify any hole between the 2 is essential to large long-term earnings, in my expertise. This includes a number of years as a senior funding financial institution dealer and 30+ years as a non-public investor.

One of the best ways I’ve discovered of doing that is by the discounted money stream mannequin. This clearly identifies the place any agency’s inventory worth ought to commerce, based mostly on money stream forecasts for the underlying enterprise.

In Greggs’ case, it reveals the shares are 29% undervalued at their present £16.81 worth.

Due to this fact, their truthful worth is technically £23.68.

My funding view

Aged over 50 now, I’m on the latter a part of my funding cycle. This implies I don’t wish to wait round for shares to recuperate from any shocks.

On this context, I’m not optimistic in regards to the UK’s financial trajectory for a number of years to come back. Particularly, I believe there might be additional surges in the price of residing and in private and enterprise taxation. These are more likely to hit fast-food sector spending for my part.

Consequently, I cannot purchase Greggs shares any time quickly.

That stated, for traders at an earlier a part of their funding cycle – and with a extra optimistic disposition – I believe they’re properly price a glance.