Greggs shares have slumped 21% in 2025. Time to consider buying?

The famed sausage roll maker’s share price has had the stuffing knocked out of it in recent weeks. Should our writer now get greedy for Greggs shares?

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It has not been a good year so far for Greggs (LSE: GRG). Greggs shares have crashed  21% this year. Yes, this year. Less than three weeks into 2025, the baker has had over a fifth wiped off its share price.

But as a long-term investor, I have had my eyes on the sausage roll supplier. So could this share price tumble represent a buying opportunity for my portfolio?

Concerns about future customer demand

What explains that fall? This month, the FTSE 250 business updated the market on its performance last year. Total sales grew 11% year-on-year. The fourth quarter saw sales growth slow, but it still came in at a pretty impressive 8%.

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The company opened a record number of new shops, it expects strong ongoing opening momentum and the year should come in line with the board’s expectations.

All of that raised the question, why the price crash? After all, that news sounds upbeat.

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

One clue was a decline in net cash from £195m to £125m. Still, fitting out new shops – as well as planning a new distribution centre – eats up cash. But as a long-term investor I see that as potentially positive for the business.

But the bigger concern, in my opinion, was Greggs’ take on what might happen next. It pointed to lower consumer confidence as a key risk to expenditure. That, it seems, has given the market fright.

Lots to like about the long-term outlook

I think that is a valid concern. The company said it had carefully managed costs in the fourth quarter, so while it ought to be able to meet expectations for 2024 performance, I see a risk that higher costs could be more problematic for profits at the full-year level in 2025.

But Greggs has been here before, many times. It has honed its business model through recessions, weak consumer spending, shop shutdowns and more. I have confidence that management will continue to move it forward positively.

Greggs has a unique brand and has done a good job developing strong products in what many thought was basically a commodified space. Its large shop estate gives it economies of scale and it has also been harnessing digital technology to help drive sales (although in my case I find its screen-based pricing displays a step backwards from when I could just look at a product and see a price tag beside it).

Not yet a bargain, but may be heading there

Still, Greggs trades on a price-to-earnings ratio of 17. So even with those strengths, I would not describe it as a bargain especially taking into account the potential for a profit squeeze this year, due to weaker consumer spending and also higher costs via higher employment costs.

But Greggs shares are 7% cheaper than they were five years ago. The business is now bigger and, in my opinion, more battle-tested than it was then.

At this price, I am still not ready to buy. But I am keeping a close eye to see whether further share price falls could make this seem like an attractive long-term buying opportunity.

But there may be an even bigger investment opportunity that’s caught my eye:

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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.

C Ruane 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.

Like buying £1 for 51p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

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