The Greggs share price skyrockets on tasty half-year numbers. Should I buy more?

A delicious set of interim figures has pushed the Greggs share price up to a two-year high. Will Paul Summers be adding to his position?

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The Greggs (LSE: GRG) share price was in fine fettle this morning (30 July) as the company revealed a smashing set of interim results to the market.

Having been a shareholder for a few years now, this makes me one happy Fool. But it’s also left me in something of a quandary. Should I be adding to my position?

In rude health

Total sales in the first half of 2024 came in at £960.6m — a jump of almost 14% on the same period in 2023. Pre-tax profit rose by 16.3% to a smidgen over £74m.

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With the cost-of-living crisis still very much with us, I’m sure most retailers would kill to post these sort of numbers.

Then again, none of the above really comes as a surprise considering that this FTSE 250 star is continuing to infiltrate every high street, airport and retail park in the land. Its total estate now sits at 2,524 shops with more expected to open in the second half of 2024.

As a further indication of just how well the company’s doing, the interim dividend was bumped up 18.8% to 19p per share. Yum!

Baked in?

Taking today’s rise into account, the Greggs share price has climbed 18% in 2024. That’s far better than the FTSE 250 index, which is having a very good year itself (+9%).

Created with Highcharts 11.4.3Greggs Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

The trouble is that this now looks to be reflected in the valuation.

Before markets opened, Greggs shares traded at a forecast price-to-earnings (P/E) ratio of 22. That’s pretty expensive for a Consumer Cyclicals stock and very expensive compared to the rest of the UK market. In fact, the P/E will now be higher if analysts stick with their current projections.

I think Greggs has earned this premium. Ignoring the pandemic, it’s managed to grow revenue and profit like the clappers in recent years. But it also suggests a lot of good news is baked in.

Should trading get sticky, the share price could fall significantly unless investors keep their expectations in check.

More growth ahead

On the other hand, there’s arguably a lot more of this growth tale left to tell.

Right now, management’s doing what it can to create extra capacity. This includes redeveloping distribution centres and building a new frozen manufacturing and logistics site. A 25-acre plot of land in Kettering has also been snapped up with the intention of creating a new National Distribution Centre.

Naturally, none of this comes cheap. Greggs had a cash balance of £141.5m at the end of June. That’s notably down on the £195.3m it had at the end of 2023 and is expected to keep falling.

But I reckon the operational efficiencies these developments will bring should justify the outlay.

Speaking of costs, CEO Roisin Currie declared today that the firm’s outlook on this front for the rest of the year “remains unchanged“. Considering how tricky the economic environment has been, that’s got to be positive.

Buy on the dip

In an ideal world, I’d like the shares to cool a little before buying more. Whether I get that opportunity is another thing entirely.

But today’s announcement has done little to shake my conviction that this is one of the best FTSE 250 stocks to own.

Next stop FTSE 100? I wouldn’t bet against it.

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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.

Paul Summers owns shares in Greggs Plc. 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.

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