Stocks For A Sweet Tooth: Greggs plc vs Thorntons plc

With Britain’s insatiable desire for sweet and savoury snacks showing no signs of slowing, today I am looking at whether sausage roll and greggs_shopsticky bun emporium Greggs (LSE: GRG) or chocolate house Thorntons (LSE: THT) is the best destination for your investment cash.

Serving up splendid earnings potential

Without doubt, City analysts consider Greggs and Thorntons to be top growth candidates, and earnings are expected to follow the nation’s waistlines and enjoy solid expansion in coming years.

Greggs is expected to punch growth to the tune of 24% in the current 12-month period, and a further 6% advance is pencilled in for 2015. These projections leave the baker dealing on a P/E multiple of 14.8 times earnings for 2014 and 13.9 times for 2015, comfortably within the benchmark of 15 or below which represents decent value for money.

Meanwhile Thorntons is expected to report stunning earnings growth in the medium term, with a 19% rise expected in the year concluding June 2015. This projection makes the chocolatier an even tastier value pick, with the firm changing hands on an earnings multiple of just 10.7 times and sporting a price to earnings to growth (PEG) readout of 0.6 — any number below 1 is generally considered delicious value.

Lip-smacking dividends on the table

Still, Greggs offers shareholders an extra treat in the form of a dividend. The business was forced to keep the full-year payment locked at 19.5p per share last year in the face of heavy earnings pressure, but an expected bottom-line resurgence from this year is anticipated to drive the dividend to 19.7p in 2014. And a further rise is pencilled in for 2015, to 20.2p.

Consequently Greggs carries a yield of 3.4% for this year, bang in line with the FTSE 100 average and which edges to 3.5% for 2015.

Conversely, Thorntons has not shelled out a dividend to investors since fiscal 2011 as a result of flimsy cash reserves, and the City does not expect this situation to change at least during the next few years.

Two terrific stock treats

So which is the better pick for hungry stock hoarders? Greggs’ product refreshment programme has gone down famously in attracting hungry customers, and in particular the roll-out of new coffee blends and a revamped sandwich range. And the baker is also enjoying the fruits of falling ingredients bills.

Meanwhile, Thorntons remains engaged in an extensive reshaping programme, resulting in the reduction in its cost-heavy store network and switch into the packaged goods segment. The firm is also chucking vast sums into brand development to boost sales, while roaring expansion in overseas markets is also paying off handsomely, and international sales leapt 20.8% during July-September.

In my opinion, neither Greggs nor Thorntons would look out of place in a savvy stock portfolio.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK owns shares of Thorntons. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.