The Motley Fool

Greggs share price rises 140% in a year: is it too late to buy?

A Greggs doughnut and hot drink sit on a table
Image: Greggs

Shares in food-to-go retailer Greggs (LSE: GRG) are on the move again today, after the company upgraded its profit guidance for the third time since May. Greggs’ share price has now risen 140% over the last 12 months.

The strength and speed of the company’s recovery has impressed me. Customers have flocked back to the group’s stores as the pandemic’s eased. I reckon this business has a strong future and I’d like to own the shares. But with Greggs stock now trading well above pre-pandemic levels, have I left it too late to buy? I’ve been taking a look at the latest numbers.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Vegan boost

Greggs made headlines when it launched the vegan sausage roll at the start of 2019. And the company has continued to expand its vegan range since that early success. Management says new products, such as the vegan sausage, bean and cheeze melt, have contributed to a 3.5% increase in like-for-like sales so far this year, compared to 2019.

Delivery is another area of growth, with 943 of the group’s 2,146 shops now offering online ordering through Just Eat and click and collect services.

Although the company expects to face pressure from rising food costs, these have been held back so far by Greggs’ policy of pre-ordering key ingredients. As a result, boss Roger Whiteside expects profits this year to be ahead of previous expectations.

New plan to double sales

Whiteside’s widely seen in the industry as a food-to-go expert. During his time at Greggs, he’s transformed the group from a traditional sausage roll-and-pasty-type operator to one of the UK’s largest sellers of takeaway coffee and food.

In a market update today, Whiteside has unveiled a bold new plan to double Greggs’ annual sales from £1.2bn to £2.4bn over the next five years.

Much of the new growth is expected to come from additional stores. Greggs believes it can expand to “at least 3,000 UK shops” and plans to open 150 shops a year from 2022.

Longer opening hours and increased delivery sales are also on the cards. The company’s breakfast offer has been a great success in recent years and Whiteside believes the group can achieve similar success with new hot food options for the evening market. This should also be a natural fit with the delivery services.

Greggs share price: will I buy?

As I write, Greggs’ stock is trading at around 3,000p. That’s equivalent to a price/earnings ratio of around 26 times 2022/23 forecast earnings.

This isn’t cheap, which is a major risk. But the group’s growth ambitions mean profits could rise significantly over the coming years. Should I consider paying a premium today to secure long-term returns? I’ve been crunching the numbers to find out.

My sums suggest that if Greggs could hit its £2.4bn sales target while keeping its profit margins unchanged, then earnings could reach around 212p per share. At today’s share price, that’s equivalent to about 14 times 2026 forecast earnings.

If Greggs continues to execute well, I think there could still be some value here. But it’s not enough to tempt me to buy, as I’d prefer a bigger margin of safety. I plan to wait for a better buying opportunity to add this popular stock to my portfolio.

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you'll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.

Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Just Eat Takeaway.com N.V. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.