FTSE 250 stock Greggs’ (LSE: GRG) share price is up 63% since September. That’s a stellar return compared to the rest of the FTSE 250 which is up around 13%.
Here’s why the bakery chain’s stock grew at five times the pace of the index, and why I see still see it as a buy right now.
Five-year plan
Greggs has been a terrific company for growth in recent decades. Between 2013 and 2021, the shares shot up 719% to give investors eight times their money back in eight years.
Long-term growth has been excellent too. In the last 30 years, shareholders netted a spectacular 4,592% increase. That would have turned £1,000 into £46,920.
Sadly, I didn’t own the shares to enjoy those returns. But the company is eyeing up further growth with its ambitious five-year growth plan.
Geared for growth
The firm’s plan starts by it continuing to grow its stores. Last year saw 147 open with a further 150 planned for the current financial year.
But the company is looking in other areas too. Over 500 of its bakeries are now open until 8pm, and its Late Trade Pizza Deal has been helping sales later on in the day.
Healthier products like the new Sweet Potato Bhaji and Rice salad bowl could expand revenues as well.
More left-field ideas come in the way of the firm’s partnerships. One with Primark to sell Greggs branded clothing and merchandise was such a success that two more collections are in the works.
All this saw total sales shoot up 17.1% to £609m, it said in the May 16 trading update.
The signs here are that this is a solid and well-managed business. One that’s geared for growth, and could be a great one to hold for another 10 years.
It’s also well-placed to possibly join the FTSE 100 at some point with its current market cap at £2.8bn. The smallest companies on the index are around £3.1bn-£3.2bn at present.
69% positive opinion
Zooming out a little, the big issue for food chains is the cost-of-living crisis. Is this growth sustainable as people have fewer pennies to eat out?
Well, I’d say Greggs might be ok here seeing as it’s one of the cheapest places from which to pick up a meal on a high street.
And the company is so well thought of that I can’t see customer numbers dropping too much. It received a 69% ‘positive opinion’ in this 2022 poll that made it the most-liked restaurant chain in Britain.
If I had spare cash
My biggest risk is that a price-to-earnings ratio of 22.9 isn’t cheap. So a certain amount of future growth is already in the price.
But on balance, Greggs looks like a great stock to me. I’d buy it right now if I had spare cash at the moment.
