I reckon UK shares could be on the cusp of moving past the malaise of 2023. I’m certainly not saying we’re hurtling towards a bull market just yet. However, there is a consensus that interest rates may finally be about to go down and latest inflation figures have also shown a drop too.
With that in mind, I believe savvy investors should look to capitalise before any potential bull run. One stock I think they should be considering snapping up is Greggs (LSE: GRG).
Yummy
Greggs is a staple for many of us, and I know I’m a fan! It serves delicious savoury goods, pastries, sweet treats, sandwiches, hot drinks, and more. The business has many locations including high street stores, as well as convenient kiosk locations in airports, and train stations.
The Greggs share price performance reflects the up and down nature of UK shares as a whole in 2023, in my opinion. Greggs has seen its shares only increase 2% over a 12-month period. As I write, they’re trading for 2,600p. At this time last year, they were trading for 2,526p.
The investment case
Starting with the bear case, Greggs’s biggest issue right now, and potentially in the medium-term, is combating external macroeconomic factors. For example, rising costs linked to inflation could take a bite out of profit margins. If it passes these increased costs on to customers, it may see demand dwindle.
Another risk is that of growth plans. The property market has been struggling and commercial properties are included in this. Greggs could find it harder to source quality locations for growth at reasonable prices. Overpaying for locations could hurt its bottom line and sentiment.
Let’s look at the other side of the coin then. Greggs released a Q4 update a couple of days ago that made for excellent reading, in my eyes. Total sales for 2023 rose by 19.6% compared to the previous year. A record 220 new shops opened in the year, which shows the firm’s excellent propensity for growth. The final highlight I’d like to share is Greggs’s exceptionally strong balance sheet with plenty of cash in the coffers.
So despite macroeconomic headwinds, the business has performed very well. Alongside this, a dividend yield of 2.5% would boost my passive income stream. However, it’s worth noting that dividends are never guaranteed.
Finally, Greggs shares look decent value for money to me personally on a price-to-earnings ratio of 19. To paraphrase Warren Buffett, I’ve no problem with paying a fair price for a wonderful company! Especially when I think it still has some way to go in terms of growth and returns.
Final thoughts
In my opinion, Greggs is one of a small number of companies to have navigated the current economic turbulence well. This is signified through its recent updates. Plus, if the business can grow at the rate it has and perform well during a downturn, how well could it do during a bull run? This prospect excites me.
As time goes on, and if more signs emerge that economic turbulence is a thing of the past, Greggs shares could really take off! I think now could be a good time to consider buying some shares ahead of this.
