This FTSE 250 stock has risen 40% over the past 6 months. Should I buy in now?

With strong growth and expansion plans, this FTSE 250 stock and high-street favourite could be due a significant re-rate.

| 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.

Number three written on white chat bubble on blue background

Image source: Getty Images

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.

Greggs (LSE: GRG), the popular high-street baker, posted strong results in January and is set for further expansion this year. After a turbulent 12 months, could this FTSE 250 stock be back on track?

Greggs saw sales rise substantially in the final quarter of 2022 to 18.2%, with festive specials such as mince pies and caramel lattes proving popular. Like-for-like sales were up on the previous year and the chain is set for expansion, with the ambition for another 150 stores to open during 2023.

Nonetheless, Greggs has faced some significant challenges over the past year. In the aftermath of the pandemic, issues have remained with supply shortages, energy price rises, and a change of management. And this may well continue in the near term.

Focus on value

Chief executive officer Roisin Currie, who took over the helm in May 2022, acknowledged cost inflation at 9% as the driver behind price rises on much-loved favourites such as sausage rolls. Currie cited value for money as key for customers during the cost-of-living crisis. In the first update of 2023 strong growth was attributed to a number of factors, including longer trading hours, greater availability of digital channels and more choice.

It seems there is a lot of potential for Greggs even while the cost-of-living crisis continues to bite. As a cheaper alternative to high-street regulars, such as Costa or Pret, Greggs could pick up customers who are looking to save money. Newly introduced ‘double up deals’ encourage customers to trade up and buy two items.

Greggs could also steal a march on competitors with its diverse range. Who can forget the impact of the vegan sausage roll on profits as it flew off the shelves in 2019? The Vegan Sausage, Bean & cheeZe Melt, reintroduced in February, is a strong contender to drive sales as well.

High-street stalwart

With the introduction of 11 new lines and a strong plant-based offering, Greggs certainly appeals to a wide customer base. Add in the ability to order through an app to earn rewards, or even have a takeaway delivered through the Just Eat partnership, Greggs could be seen as a low-cost easy treat.

Interestingly, a less-reported development could make a fundamental change to Greggs’ bottom line. A judge rejected Zurich’s limitation of Covid-19 interruption to business losses at one instance with a corresponding limit of £2.5m. The ruling stated that there were multiple interruption losses, each with a limit of £2.5m. Owing to the ruling, Greggs is likely to receive a significant payout in due course.

In spite of substantial recent rises in the share price, I still think that Greggs has a lot of potential to grow and is one of several high-street chains that will do well in the current economic environment. Whilst I am not invested at the current time, I am strongly considering adding this stock to my retail portfolio.

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.

Gilly West has no position in any of the shares mentioned. The Motley Fool UK has recommended Just Eat Takeaway.com. 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

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

How I’d invest my first £20k ISA to target £4,900 a year from dividend shares

Looking for dividend shares in a new Stocks and Shares ISA, and want diversification too? Here's how I'd go about…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

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

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »