Not so long ago, Greggs (LSE: GRG) shares were on fire. Last year, they raced up from 2,400p to 3,250p – a gain of 35% – in the blink of an eye.
However, recently, the upward trend has broken down in a big way and the share price has collapsed. Here’s a look at how much £10,000 invested in the FTSE 250 stock at its peak in 2024 would be worth today…
Nasty losses
As I write this on Friday (4 July) afternoon, Greggs shares are trading at 1,726p. That’s a whopping 47% below the peak share price of 3,250p last year (which was hit on 20 September).
This means that anyone who was unfortunate enough to stick £10,000 on the stock on that price is now sitting on shares worth around £5,300 – ouch!
It’s worth pointing out that Greggs pays dividends. So, income from the company would have offset the share price losses.
But not by much. Investors would only have received dividend income of around £150, so they’d still be sitting on massive losses.
An unexpected break down
Now, I have to admit, I didn’t see this share price collapse coming. When I looked at the stock last year, I saw quite a bit of appeal.
Sure, the valuation was a little high – the price-to-earnings (P/E) ratio was in the low 20s. But on the plus side, you had a company with a well-known, trusted brand, solid sales growth (and a growth strategy for the future), a high level of profitability, a decent dividend, and bullish broker forecasts.
So, I thought the stock was worthy of a premium valuation. And I expected the share price to keep climbing.
Operational challenges
Greggs has experienced some operational challenges recently, however.
In January, the company reported sluggish sales growth. At the time, it blamed low consumer confidence and subdued High Street footfall.
More recently, on Wednesday (2 July), the company said that full-year profit could be modestly below last year’s figure. Here, it blamed the hot UK weather in June.
I wonder if theft could also be hurting its performance. Recently, it has been facing huge problems here, so much so that in some stores, it has had to lock up its drinks cabinets.
These issues highlight the risks associated with investing in individual stocks. No matter how good a company looks on paper, things can and will go wrong at times, so it’s important to diversify capital over many different stocks.
Worth considering at 1,726p?
Are the shares worth considering at today’s share price? Potentially.
While a weak operating backdrop remains a risk, I believe there’s some value on offer today. Currently, the P/E ratio is near 13 and the dividend yield is a tasty 4%.
That said, Greggs is not the first stock I’d buy if I was keen to put some investment capital to work. In my view, there are other stocks that offer more compelling growth profiles right now.
