Greggs (LSE:GRG) shares will have lost a lot of investors a significant amount of money in recent years. Retail investors often invest in what they know best, and Greggs is omnipresent across the country. What’s more, institutional analysts continually raised their price targets for the baker despite the valuation becoming increasingly stretched.
So, what now? Let’s explore.
Science moving into public consciousness
Our tastes change slowly, and sometimes we don’t even notice it.
A decade ago I would quite happily eat a processed sandwich and devour a packet of cookies at my desk. Beyond the realisation that my metabolism couldn’t support that calorie intake, things have changed, and slowly. Today, I wince at the thought of what that food would be doing to my insides. I believe my body is made to run on unprocessed foods and not a beige pastry.
This might sound like an extreme anecdotal evidence, but we’re all becoming increasingly aware that our health reflects what we put in our bodies.
Ultra-processed foods — covering anything from flavoured yoghurts to reconstituted meat products — now account for roughly 57% of calories consumed in the UK (more than anywhere in Europe, but less than the US).
Those numbers alone aren’t alarming until you look at what sits alongside them. A landmark NIH study in 2019 found that participants eating ultra-processed diets consumed an average of 500 more calories per day than those eating unprocessed food — even when the meals were matched for sugar, fat, fibre, and protein on paper.
And this is a narrative that’s becoming harder to avoid, in part because of the work of the van Tullekens. Chris, whose book Ultra-Processed People became a UK bestseller, has done more than most to drag the science into public consciousness. His brother Xand and sister-in-law Dolly have extended that reach further, making the conversation about what’s actually in our food feel less like a niche concern and more like something the rest of us have been ignoring for too long.
Ok, what does all of this mean for Greggs?
Well, Greggs might be mixing up its menu, but to most of us it’s still a bakery. If this narrative is becoming more mainstream, there’s clearly a thesis that suggests we won’t be visiting as often.
The metrics
The above largely aligns with the data. Greggs continues to expand its store count, but like-for-like sales growth is painfully slow — just 1.5% for the last quarter. Revenue is slowing, and earnings are stagnating: 143p (2023), 144p (2024), 124p (2025 estimate), 125p (2026 estimate).
The stock now trades around 12.7 times forward earnings. And while that’s a lot cheaper than it was, it can still look expensive in the context of no projected earnings growth and a higher net debt-to-equity ratio. The dividend yield has pushed up to 4.3% as the share price has fallen.
However the overall maths don’t add up to me. It might be worth considering, but investors who believe so will be betting on improved operational performance rather than an obvious undervaluation.
