Up 455% in 10 years! Here’s why I think Greggs shares will keep on climbing

Oliver thinks this leader in British baked goods is going to remain popular over the long term. Here’s why he’s considering buying Greggs shares.

| More on:
Happy young female stock-picker in a cafe

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.

Key Points

  • Greggs shines in the UK bakery sector, known for its widespread presence and appeal to those seeking convenience and value, with shares showing strong historical growth.
  • With a decade of revenue growth at 9% annually and an impressive net income margin, Greggs' adaptability, like its vegan product launches, underpins financial success.
  • Despite high confidence in Greggs' future, risks include dependence on the UK market and health trend impacts, yet the current valuation suggests good investment potential.

There are few investments in the UK I am as confident about as I am in Greggs (LSE:GRG) shares. I think the company has stellar growth, both in the past and estimated to come.

Also, with what I deem to be a good valuation at the moment, the firm’s risks just can’t seem to deter me.

Here’s why the investment is high up on my watchlist right now.

Top of the British bakery world

If you live in the UK, you have likely heard of Greggs. It certainly has a presence in almost all major towns and cities across the country.

The business particularly appeals to customers who are looking for convenience, cheap prices, and filling foods. However, for me, the more appetising aspect of the business is its shares.

An immense track record

Greggs has had an incredible history of great performance in its shareholders. In fact, over the past decade, the shares have appreciated in price by 455%:

Investors who bought in during the pandemic dip in 2020 have gotten very lucky. Over the past three years, the firm has managed to grow its revenues by 30% annually from its setback during the crisis. Its revenue growth has been more like 9% annually over the past decade.

But where this company really shines is in its profitability. It has a net income margin of almost 8%, which out-competes 89% of other businesses in its industry.

I think one of the things Greggs has shown promise in, which has supported its financials, is making itself adaptive to consumer trends. For example, as veganism started to become all the rage, Greggs introduced the vegan sausage and vegan steak bake. This contributed to significant sales growth.

Good value for money

Greggs products have a reputation for being good value, and I think the shares can be considered so, too, at the moment.

You see, while the investment sells at a high price-to-earnings ratio of around 20 right now, over the past 10 years, it’s been normal for this to be roughly 21.

Considering that analysts expect its earnings to grow at a compound annual growth rate of 9.6% over the next two years, I think the present valuation of the business is appealing.

What about the risks?

All of the above suggests that I think Greggs is in for a stellar future, continuing on from its prosperous past. However, every investment comes with a set of risks.

As the company is dependent on the UK market for all of its revenue, it unfortunately might find that it struggles more than global businesses during a British recession.

Also, Greggs is considered a less healthy option, and with massive health trends underway, I can see its total addressable market shrinking if it doesn’t evolve more aggressively to satisfy the changing market.

I think it’s a fantastic investment

This is undeniably one of the strongest businesses in the country based on financial performance. The growth doesn’t look set to stop any time soon, either.

So, Greggs is high up on my watchlist for when I next invest.

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.

Oliver Rodzianko has no position in any of the shares mentioned. The Motley Fool UK has recommended Greggs Plc. 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

Young Caucasian woman holding up four fingers
Investing Articles

7%+ dividend yields! 4 FTSE 100 shares for investors to consider buying in April

These FTSE shares offer dividend yields comfortably above the index average of 3.7%. Here's why they could be good passive…

Read more »

Dividend Shares

£10k in an ISA? Here’s how to generate a ton of passive income

Passive income can provide a lot more financial freedom and security. Here’s an easy way to generate some within an…

Read more »

Investing Articles

The Aviva dividend yield’s already over 7%. Could it go higher?

Christopher Ruane explains why he thinks the Aviva dividend could be on course to grow this year and beyond. Might…

Read more »

BUY AND HOLD spelled in letters on top of a pile of books. Alongside is a piggy bank in glasses. Buy and hold is a popular long term stock and shares strategy.
Investing Articles

2 shares I’d buy to try and double my money in 10 years

Stephen Wright thinks there are still opportunities to to buy UK shares that can double in value over the next…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

NIO stock has crashed! Here’s why I still wouldn’t touch it with a bargepole

I've been watching NIO stock falling heavily, and wondering when might be a good time to get in cheaply. Here's…

Read more »

Investing Articles

Why have Rolls-Royce shares fallen this week?

Rolls-Royce shares remain the best performing on the FTSE 100 over the past year, but there's been some pullback. Dr…

Read more »

Investing Articles

With a 4.3% yield, I consider this FTSE company an exceptional investment

Oliver Rodzianko say this FTSE company is focused on quality and long-term survival. As such, he thinks he'll hold it…

Read more »

Investing Articles

How I’d invest £10,000 in a Stocks & Shares ISA and aim for a £45,500 second income

Millions of us aren’t earning the second income we deserve. Here, Dr James Fox explains how he’d get his savings…

Read more »