When a stock loses a significant amount of value over a period of time, it prompts investors to reassess their position. An extensive fall could make the company a bargain, or at least make it interesting to consider buying for a long-term rebound. I’ve spotted two firms with a share price drop of 40% or more in the past year. Here’s why I think both could be good value shares.
Store openings to push rebound
The first one is Greggs (LSE:GRG). Over the past year, the stock is down 40%. There have been several factors contributing to this move lower.
The weather has partly been to blame, with the recent heatwaves actually causing “increasing demand for cold drinks but reducing our overall footfall”, according to a trading update. Another factor is that the strong growth trajectory in recent years could be showing signs of slowing. In an update, it stated that “the board now anticipates that the full year operating profit could be modestly below that achieved in 2024”.
I think the stock now looks good value. The price-to-earnings ratio has fallen to 11.55, which is low for a growth stock. Usually, these types of companies have a ratio of 15-20. Further, the business is still pushing for strategic store expansions. It opened 145 net new outlets in 2024 and plans 140-150 more by the end of this year, targeting over 3,000 stores in total. This sets it up well for continued revenue growth.
Let’s not forget that Greggs holds a top brand position and dominates the breakfast takeaway market. The core principles of value and convenience should help it to weather this tough patch in the short term.
Looking past near-term clouds
Another company is B&M European Value Retail (LSE:BME). The stock is down 43% over the last year, with the move lower coinciding with two profit warnings in early 2025. The management team cut EBITDA guidance due to subdued consumer spending, wage inflation, rising interest rates, and supply chain disruptions.
Those are a lot of problems to get over, so I understand some of the investor’s concerns. Although all of those problems represent a short-term risk, I don’t see them as long-term headaches. Consumer spending goes in cycles, as does wage inflation. I expect global inflation levels to ease in the coming couple of years, with consumer spending increasing, particularly in the UK as we come out of the economic slump we’re currently in.
CEO Alex Russo stepped down earlier this year, which is a short-term negative but could be a long-term positive. Ex‑Tesco executive Tjeerd Jegen is at the helm, and a fresh set of eyes and strategy initiatives could be a good thing going forward.
Overall, I think both beaten-down shares are worth considering by investors, for a potential rally in the coming years.
