Will Greggs shares be my investment of the decade?

With the growth story ongoing and recent robust trading, I think Greggs shares could be an enduring part of my portfolio.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Food-on-the-go retailer Greggs (LSE: GRG) has been a steady ongoing growth story since joining the stock market in 1984.  And despite the many decades of success with its expansion, the company remains hugely ambitious. 

Why I’m holding Greggs shares

Greggs has a “strong” new shop-opening pipeline. And there’s also a “significant” opportunity to improve the quality of the store estate via relocations and shop refits. The company’s website declares a goal to expand to “at least” 3,000 shops as its next target. 

And to put that in perspective, today’s third-quarter trading update confirms the business has just over 2,200 retail outlets across the UK. Of that total, around 380 are franchise partners.

Meanwhile, I’m encouraged by the figures in the report. It leads with the headline: “Trading in line and full-year expectations unchanged.” And City analysts following the firm had pencilled in modest single-digit percentage advances in earnings for 2022 and 2023.

In the 13 weeks to 1 October, sales increased by just under 15% year on year. And like-for-like-sales in company-managed stores rose by just under 10%. It seems the business is in good health and that has surprised the market a little. The stock is playing catch-up this morning. And it’s up more than 9% as I write.

Over the past year, the general market malaise has pulled down Greggs shares. And the current share price close to 1,886p is around 33% lower than it was this time last year. However, the forward-looking earnings multiple for 2023 is just above 15. And I’d describe that valuation as fair rather than cheap.

Steady, profitable growth

Nevertheless, the absence of a bargain-basement valuation doesn’t dampen my enthusiasm for the long-term growth prospects of the business. So far this year, Greggs has opened a net 90 new shops. And the directors’ expectation of achieving 150 openings for 2022 is unchanged.

Looking ahead, the company expects the full-year outcome to be in line with expectations. So, despite all the scary macroeconomic and geopolitical headlines, Greggs has been grinding on as normal. And to me, that means steady, profitable growth from a well-loved brand.

I’ve been impressed by the way it has evolved its expansion strategy to find new markets. It now has a thriving delivery and click-and-collect operation. And it’s been making huge strides penetrating suburban locations and places where people “travel, work and/or access by car”. 

These days, it seems we can find a Greggs almost anywhere. But I’m not worried that the company may be getting close to saturating its markets. And I don’t think it faces realistic competition from more upmarket brands. It has a good-value proposition and I reckon there will always be a strong market for that.

Despite my bullishness, it’s possible for the shares to disappoint me in the long term. Any business can face operational challenges from time to time. However, the business has just demonstrated its resilience during difficult times. And I’m optimistic the stock can turn out to be my investment of the decade.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kevin Godbold owns shares in Greggs. The Motley Fool UK has no position in any of the shares mentioned. 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.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »