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Greggs (LSE: GRG) shares have been one of many strongest performers on the FTSE 250 over the past decade. Shareholders may also be completely happy to see that the inventory has climbed an additional 10% this yr.
That beats the FTSE 250, which is up 6.2%. It has additionally outperformed the index over a five-year and 10-year interval, rising 29.6% and 451.4% in comparison with 7.7% and 30.9%.
However with its share worth rising, the place does this go away potential buyers? Is there room for extra progress? Or has the ship sailed? Let’s discover.
Challenges forward?
After I take a look at Greggs, I see a couple of points which will hinder the agency’s progress.
Firstly, whereas the sausage roll maker has change into extremely in style with its sensible advertising over the previous couple of years, I can’t assist however really feel prefer it’s swimming towards the tide on the subject of long-term consuming habits.
Lately, there’s been a big push to advertise more healthy consuming. Individuals are extra aware about what they’re placing of their our bodies than ever earlier than and the ultra-processed menu supplied by Greggs doesn’t align with a wholesome life-style.
Secondly, the inventory seems to be costly. It trades on 20.7 instances earnings. That’s above the FTSE 250 common of round 12. Whereas that’s forecast to fall to 18.6 instances for 2026, that also seems to be overpriced to me.
A resilient enterprise
However then once more, Greggs is resilient. It has confronted challenges earlier than and overcome them. What’s to say it could actually’t preserve delivering?
For instance, gross sales final yr rose 19% to £1.8bn regardless of a cost-of-living disaster. A buying and selling replace in Could confirmed that the enterprise had saved up this manner in 2024, with like-for-like gross sales up 7.4%. Because the enterprise put it itself, it’s at present working in “difficult circumstances”. However, it appears to be coping simply fantastic.
Trying forward, Greggs has no plans to decelerate both. It opened 64 new shops in the course of the first 19 weeks of the yr. That takes its complete to 2,500. There’s the argument to be made that when budgets are tight, shoppers will revert to Greggs low-cost and cheerful items.
There’s additionally its tasty 2.2% dividend yield to take into accounts. That’s beneath the FTSE 250 common (3.2%). However, its payout has been steadily rising, which is at all times encouraging to see. During the last decade, the corporate has elevated its dividend by 11% a yr on common.
Time to purchase?
However even after weighing it up, Greggs isn’t a inventory I’ll be shopping for right now. We’ve seen the corporate rise from humbling beginnings to a British stalwart. Whereas that’s inspiring, the inventory seems to be a tad too costly for my liking.
I’m additionally involved about evolving social traits. It’s proved its resilience. Nonetheless, within the years and many years to come back, I feel we might see a significant shift in client habits.
The FTSE 250 is house to loads of thrilling companies. So, I’ll stay on the seek for my subsequent purchase. I’ve obtained a couple of thrilling firms on my radar that I’ll be exploring within the weeks to come back.
