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For some time, buyers have been making a small fortune out of Greggs (LSE: GRG) shares. The bakery chain was flavour of the month amongst customers on The Motley Idiot, attracting consideration far past its standing as a medium-sized FTSE 250 inventory.
A part of that was right down to spectacular progress as Greggs saturated UK excessive streets and expanded into supermarkets, retail parks, railway stations, and even airports. The group’s advertising was simply as spectacular. The Greggs vegan sausage roll turned a joke we might all sink our enamel into.
Development inventory falls
At their peak, roughly in the summertime of 2024, the shares topped 3,000p however have been getting costly, with the price-to-earnings (P/E) ratio heading in direction of 25. The trailing dividend yield slipped in direction of 2%. I wrote about Greggs commonly however determined buyers have been pricing in additional progress than it might realistically serve up.
Then the cost-of-living disaster bit. Even a cheeky deal with from Greggs turned too expensive for a lot of households. Gross sales continued to rise, however at a slower tempo from October 2025. And that was all it took to vary sentiment.
The Greggs share worth has now slumped 38% over two years and 21% over 12 months. It’s additionally made a poor begin to 2026, falling 6.5% within the final week alone, regardless of the board reporting an increase in fourth-quarter gross sales on 8 January. Traders turned their noses up at steering that income are anticipated to be flat this yr as shoppers wrestle.
So have buyers swung from being too grasping for Greggs’ shares, to overly sniffy?
Decrease valuation, increased yield
Whole 2025 gross sales nonetheless rose 6.8% to £2.15bn, though like-for-like progress at company-owned shops was a extra modest 2.4%. That also represents “good progress” in difficult occasions, in keeping with CEO Roisin Currie. She stated new retailer openings ought to drive additional progress.
Shopper shares are typically cyclical and even Greggs hasn’t escaped the present downturn. But the shares look low-cost. The P/E ratio has plunged to 10.8. There’s extra earnings too, with a trailing dividend yield climbing to 4.25%, comfortably coated twice by earnings.
Are we a possibility to purchase into the Greggs progress story at a a lot decrease valuation? That query solutions itself. In contrast with 18 months in the past, the reply is clearly sure.
One-year consensus forecasts produce a median share worth goal of 1,868p. If achieved, that’s a achieve of 15.75% from in the present day’s 1,614p. Add within the dividend, and the whole return might hit 20%, turning a £10,000 funding into £12,000. Even JPMorgan is now Chubby, setting a December 2027 goal of two,110p. That’s up 30% from in the present day.
Risky occasions
This actually does appear like a once-in-a-decade second. The shares at the moment are drifting again in direction of ranges final seen in 2018. That’s a dramatic reversal for a enterprise that continues to be worthwhile, cash-generative, and nonetheless increasing.
So sure, I believe the shares are value contemplating. My main concern is progress. Greggs should be nearing the bounds of UK enlargement. There are solely so many shops Britain can abdomen. And I’m not satisfied there’s an enormous international marketplace for Corned Beef Bakes or All-Day Breakfast Baguettes.
This can be a uncommon alternative to purchase into the Greggs story at a much more cheap worth. I simply don’t suppose that story is kind of as compelling because it was.
