The last 12 months have been rough for Greggs‘ (LSE:GRG) shares, which have potentially tumbled into value stock territory after collapsing 40%. Investor sentiment surrounding the beloved British bakery chain has seemingly soured in 2025 as growth’s begun to slow significantly compared to its less-recent track record.
So should investors be worried? Or is this a value stock worth considering today?
What happened?
Despite what the share price suggests, Greggs’ revenue and profits have continued climbing to new record highs. And it’s a similar story with its network of locations, which now sits at 2,649 shops scattered across the country.
Sadly, stock prices are rarely driven by what a firm’s achieved, but rather by what it can create in the future. And it’s this latter part that investors have started questioning. Despite rolling out some viral products like its new Mac & Cheese, along with the continued popularity of its Pizza offer, volume growth has seemingly slumped.
An excessively wet start to the year, followed by an exceptionally hot start to the summer, has resulted in reduced footfall to its stores. Consequently, revenue growth has halved, from around 14% to 7%, with like-for-like growth similarly tumbling from 7.4% to 2.6%. And with Greggs’ shares previously trading at a premium valuation, such a slowdown unsurprisingly resulted in a massive sell-off.
But with the stock now trading at a price-to-earnings (P/E) ratio near a 10-year low, is this secretly a screaming value opportunity?
Overly punished?
Bad weather’s obviously out of management’s control. And in the short term, it can be quite disruptive to high street retailers. But in the long run, cash-generative enterprises like Greggs have historically bounced back in the medium to long term.
On the surface, that seems like a likely outcome in this scenario, especially since the UK’s currently enjoying real wage growth for the first time in almost 20 years, giving consumers more disposable income. However, there may be far more at play here than just the weather.
Such a rapid slowdown in like-for-like growth could also be a signal of market saturation, where new locations are stealing customers from existing stores. It’s too early to tell if that’s the case. But if it is, then a rebound in growth when the weather improves may fail to materialise. And if low-single-digit expansion is all investors can expect moving forward, then today’s low P/E ratio of 11.2 seems justified.
The bottom line
So is Greggs a good value stock to consider today? If the company can restore its growth to double-digit territory, then the shares currently look cheap. But if it can’t, they may have further to fall. And this uncertainty is what’s been driving recent target price downgrades from institutional investors.
Personally, I think staying on the side of caution and not considering it for now makes sense here. Even more so, given management’s now warned that full-year profits for 2025 could fall below 2024 levels.
