A closer look though, reveals a different picture. On a free cash basis, the stock actually looks quite expensive right now.

Cash is king

A company’s cash flow statement tracks how cash moves through a business. It records how it’s generated and where it’s used. In the case of Greggs, its free cash flow for 2025 was around £74m. That’s a lot lower than the £122m it reported in net income. One reason for this is the firm had unusually high capital expenditures. These came in at £287m, which represents a big cost.

Investors however, don’t need to worry too much about this. They’re one-off investments that should be much lower in future years. There is however, something that I think they do need to pay attention to. And it isn’t reflected in the company’s free cash flow.

Lease liabilities

Greggs operates a lot of stores. Many of them are rented and these leases are liabilities that the company pays back each year. In 2025, Greggs spent £63m on lease liabilities. But since that’s classified as a financing cost, it doesn’t show up in free cash flow. 

Source: Greggs 2025 Preliminary Results

The firm does report this clearly in its results. But it means the £288m capital expenditures exceeded its cash from operations.

I don’t expect that £63m figure to fall in future. In fact, I think it’s likely to go up if Greggs keeps opening more stores on a leasehold basis. 

This is something that investors should think about. My own forecast is for around £80m in free cash flows this year and then £110m in 2027. At today’s prices, that implies a multiple of around 15. I think that’s probably reasonable, but those cash flows are still two years away.

Dividends

One good thing about Greggs is that investors do get paid to wait. The stock comes with a 4.3% dividend yield. The company didn’t increase its shareholder returns in 2025. And that shouldn’t be a big surprise from its cash flow statement. 

Maintaining the dividend cost the firm a total of £70m. But that’s far more than the cash it brought in when factoring in lease payments. The firm actually took on £25m in debt during this time. From my perspective, I’d rather they cut the dividend on a temporary basis instead.

The stock market might not have liked it, but the share price has been falling anyway. And at least they wouldn’t be paying interest on the debt. Given my forecast for 2026, I’m not expecting an increase this year. After that however, things do look more manageable.

Too cheap to ignore?

Greggs’ shares look extremely cheap at first sight. But when I take a look at the firm’s leasing costs, I’m not so convinced. Based on my estimates, the stock trades at some multiples that look pretty reasonable to me. So I’m in no hurry to buy it.

There’s a lot more going on than meets the eye. And that’s without thinking about the macroeconomic outlook for the UK.

The post Here’s why Greggs shares might not be as cheap as they look appeared first on The Motley Fool UK.

Greggs shares are now down more than 50% from their 52-week high, set in 2021 when growth investors were in full buying mode. But I don’t see anything fundamentally wrong with the company. And I think we coud be looking at a long-term bargain here, after a needed reset.

Mood swing

Let’s face it, a price-to-earnings (P/E) ratio above 20 is generally reserved for hot growth stocks — in the UK, at least. But that’s where Greggs shares were trading before they fell.

And, well, Greggs sells baked good and sandwiches, and things like that. Unless someone invents a way for sausage rolls to power the AI explosion, I just can’t see Greggs ever being worth a tech-like growth valuation.

But Greggs does one thing well, and I could see it powering wealth gains for investors for years to come. Greggs generates cash pretty handily. In the 2025 year, the company saw net operating cash inflow (after lease payments) of £273.7m (up from £261.9m the year before).

Greggs maintained its 2025 dividend at 69p per share. And the same again this year would mean a dividend yield of 4.2% on the current share price. That might not sound brilliant. But 2025 saw capital expenditure reach a peak, and it’s expected to fall to a figure around 45% lower from 2027 onwards.

Predictions

Going on the latest analyst forecasts, this all means we could be in for a period of dividend growth again. It’s not likely to be astronomical, but steady. It could mean rises of around 3% to 4% per year. And that should be enough to beat long-term inflation.

Over that period, we could see the Greggs P/E fall from an expected 13 for the current year, to 11.5 by 2028. And that seems a lot more reasonable to me than the unsupportable heights the valuation reached in recent years.

I also think Greggs deserves something of a safety premium. It’s not the most glamorous retail stock around. But customers do seem to keep coming back, year after year.

Out of favour

Saying that, there’s no denying investors have turned away from Greggs. And the way sentiment goes in the stock market, it might be some time year before we see much sign of new optimism. Until then, I reckon Greggs shares could remain in the doldrums. I can see it maybe taking a couple of years.

But for me that means we could see buying opportunities continuing for some time yet. I rate Greggs as one investors should consider topping up from time to time, while the shares remain out of fashion.

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Since October 2024, when Chancellor Rachel Reeves announced a hike in Employers’ National Insurance and lowered the threshold, Greggs’ shares have crashed 42%. This would have turned a £5,000 investment into £2,900, excluding dividends.

Not only did the Budget increase Greggs’ staffing costs, it arguably had a chilling effect on the UK economy. Many businesses paused hiring, pushing up unemployment, which now stands at a five-year high.

In 2023, Greggs’ total and like-for-like (LFL) sales jumped 19.6% and 13.7% respectively. In 2025, those figures were 6.8% and 2.4%, with underlying operating profit falling 4% to £188m.

Greggs under pressure

In the first nine weeks of 2026, LFL growth slowed even further, to 1.6%. And Greggs can’t seem to catch a break, with the Iran war now expected to send energy, food and fuel costs higher.

And despite the FTSE 250 company opening 121 net new stores last year, and planning a similar amount this year, investors fear we’ve reached ‘peak Greggs’. Can the brand really hit 3,000+ locations without cannibalising existing store sales? The market clearly isn’t convinced.

On top of this, the rise of GLP-1 drugs such as Mounjaro is forcing the company to adapt its menu. As a result, there are as many egg pots in the fridge in Greggs nowadays as there are sausage rolls behind the glass counter.

The growing use of GLP-1 drugs for weight loss is reshaping eating habits and reducing demand for calorie-dense foods. We research these trends and innovate with products that support satiety and balanced nutrition, including items that are high in fibre, plant-based and protein-rich.

Greggs 2025 annual report.

Is the baker at risk of losing its identity with this push towards healthier food? It’s possible.

To summarise then, there are a multitude of things weighing on the share price today:

• Slowing growth.
• Profits under pressure.
• Rising UK unemployment.
• Ongoing cost of living pressures.
• Peak Greggs concerns.
• Declining high street footfall.
• Potential GLP-1 impact.

Due to some of these factors, Greggs is currently the UK’s third most-shorted stock behind Ibstock and Wizz Air. So sophisticated investors are betting there’s more pain to come.

Not all doom and gloom

Despite the obvious challenges, Greggs still has many attractive qualities. It possesses a unique brand, strong balance sheet, and industry-leading profit margins (even after recent pressure).

Plus, there’s a well-covered forward dividend yield of 4.2%. That’s above the FTSE 250 average.

It’s also worth mentioning that capital expenditure peaked last year, which should result in significantly improved cash flow moving forward. And robotic order picking in one of its two new state-of-the-art distribution centres opening soon should improve efficiency.

Another thing I like is that around 20% of shops are now franchised (managed by third-party partners). These tend to outperform company-managed shops, as they’re primarily focused on roadside locations. And they also pick up the day-to-day running costs (rent, electricity, and so on).

Finally, the shares look cheap now. Based on forecasts for 2027, the forward-looking price-to-earnings ratio’s 12.5.

For patient investors with a multi-year investing horizon, I think the stock’s now a buying opportunity worth thinking about.

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But the big question is whether it’s now being overlooked. Many investors won’t consider stocks that have poor momentum — consistently moving in the wrong direction — however, this can be where the best value stocks are found.

So, has the fall finally created a buying opportunity? My honest opinion is: not yet.

Not as cheap as it looks

On a forward price-to-earnings ratio of 12.9 times, Greggs looks reasonable. But headline multiples can flatter a stock. The analyst consensus is forecasting earnings per share (EPS) of 125p for 2026 — lower than the 133p delivered in 2025 and well below the 144p earned in 2024.

This isn’t a growth stock temporarily on a trough multiple. It’s a company whose earnings are still heading in the wrong direction.

The price-to-earnings-to-growth (PEG) ratio isn’t available because you can’t calculate it when forecast EPS growth is negative. This can be a sign of a value trap.

What’s more, price-to-free cash flow sits at 32 times. For a mature UK bakery retailer, that requires a justification I haven’t found.

It might be time for investors to stop thinking about Greggs as a fast-growing chain, and more like those slow-moving tobacco stocks that are doing well to tread water.

And then there’s the balance sheet

Net debt has ballooned from £85m in 2021 to £404m today — nearly a fivefold increase in four years. Cash on the balance sheet has fallen from £199m to just £71m. Working capital has swung from a positive £59m to negative £152m.

When we factor this into the earnings metrics above, it confirms my belief that the stock really isn’t that cheap at all. Net debt is equal to around three years of next profit. It’s not a worrying amount of debt, it’s just noteworthy relative to earnings and market cap.

Capital expenditure has exploded from 53p per share in 2021 to 278p last year as Greggs pushes into evening trading, delivery, and new store formats. The consequence is that free cash flow has collapsed from 225p per share to around 50p.

The bottom line

Some investors will undoubtedly be attracted to the 4.3% dividend yield. It’s a little better than the yield you’d get on a Gilt, but I’m still not sure it’s worth the risk.

That’s because there’s also a structural issue that doesn’t show up in any spreadsheet. Greggs built its brand on cheap, indulgent, calorie-dense food. That’s a harder sell in a world slowly moving toward healthier eating habits. It may not matter this quarter. Over a five-year investment horizon, I think it matters more.

Greggs is a fine business with genuine brand loyalty. But I just don’t believe the numbers add up, and I don’t believe it’s well positioned for the future. I don’t believe it’s worth considering.

The post At 12.9x, are Greggs shares cheap enough yet? appeared first on The Motley Fool UK.

But that’s not the full story. The baker’s stock is now changing hands for 51% less than it was in December 2021 when it recorded its five-year high.

So what’s going on? Why has an icon of the British high street fallen so far out of fashion? More importantly, could now be a good time to consider taking a stake? Let’s take a closer look.

Out of favour

According to recent data, Greggs is the UK’s third most-shorted stock. Thirteen investment firms have borrowed 12.49% of the group’s shares (currently worth £210m) in the expectation they will fall in value. Of course, this doesn’t necessarily mean it will happen. It’s only a small sample of opinions.

But let’s leave this to one side and judge the investment case using some of the key performance indicators that the group uses to assess its own performance.

Slowing down

The first thing to note is that sales are increasing. Revenue during the 52 weeks ended 27 December 2025 (FY25) was 75% higher than in FY21.

However, the rate of increase in both total sales and like-for-like sales is slowing. Even when the exceptional 2021 bounceback from the pandemic is ignored, the slowdown’s significant.

By contrast, the group’s earnings, particularly on a per share basis, are flat. Comparing FY25 with FY23, there’s been little change. Increases in Employers’ National Insurance and the National Living Wage have affected the group’s bottom line. Supply chain inflation has increased direct costs.

Another issue

Also of concern, capital expenditure’s increasing but the group’s return on capital employed (ROCE) is falling. In other words, it’s spending more but getting less back. Some of this is to be expected given that it’s continuing to open more stores. The marginal return from each new shop is likely to fall as the best locations have already been secured.  

Had the group achieved the same ROCE in FY25 as it did in FY21, its earnings would have been £20m higher. This would have been enough to completely change the perception of its financial performance over the past five years.

What does all this mean?

But there’s no point dwelling on ‘ifs’ and ‘maybes’. The reality is that Greggs’ revenue and earnings aren’t growing as fast as would be expected of a FTSE 250 business. Investors are prepared to overlook this if they can see a clear path to recovery but the relatively higher number of those that have shorted the stock suggest there’s a high degree of uncertainty.

Despite its woes, Greggs retains a strong brand and remains a British success story. But I think the jury’s out on whether it’s going to recapture former glories.

Weight-loss drugs pose a threat – it’s estimated that around 5% of adults are using them – and a move towards healthier eating is another challenge. The group’s adapting by offering smaller calorie dense alternatives but, let’s be honest, it’s hard to beat the taste of sugar and fat.   

So as much as I love Greggs, I think there are better opportunities to consider elsewhere.

The post 5 years ago, £5,000 bought 218 Greggs shares. How many would it buy now? appeared first on The Motley Fool UK.

So why are dividend chasers checking it out? It’s simple. A 10.4% fall in the Greggs share price over 12 months has pushed its dividend yield to 4.3% for 2026. That’s beats the FTSE 100‘s long-term average range of 3%–4%.

Things get even better for 2027, with the yield rising to 4.4%. But how robust are current dividend forecasts? And should I consider buying the FTSE 250 company for my income portfolio?

Dividend growth in 2027?

If City estimates are accurate, a £20,000 investment in Greggs today will provide an £860 passive income this year alone. If I reinvest these dividends and buy more Greggs shares, my total income over 2026 and 2027 will rise to £1,779.

These are based on expected dividends of:

• 69p per share in 2026.
• 70.7p per share next year.

If forecasts are correct, this year will be the third in a row that a 69p reward’s been paid. But with the Iran War worsening the existing cost-of-living crisis in the UK, is this realistic? And what about the payout increase tipped for 2027?

What’s the catch?

Let me put it this way: there’s a good chance of Greggs hitting those dividend targets, but I wouldn’t bet the house on it.

First, let’s look at dividend cover. For the next two years, expected dividends are covered 1.8 times by anticipated earnings. That’s good, but below the widely accepted security benchmark of two.

Given how sensitive the baker’s profits are to consumer spending, I want higher cover in today’s climate. My concerns are soothed somewhat by the strong balance sheet, which ended 2025 with net cash of £45.8m. But the firm’s expensive store expansion strategy means that cash pile doesn’t offer bulletproof protection for dividends.

Is Greggs a dividend share?

The truth is, I own Greggs in my portfolio. But I didn’t buy it for the dividend potential. And I won’t buy it for passive income now.

Consumer spending power in the UK remains extremely weak. And while the baker’s sales have been better more recently — helped by market share gains — the Iran War poses an ongoing risk to earnings. With costs also in danger of spiking, dividends could come under pressure.

Yet this doesn’t mean Greggs shares aren’t worth serious consideration today. The long-term investment case here remains intact, driven by new store openings in busier areas; improving exposure to delivery and evening trading; and more menu innovations.

And right now, Greggs’ share price is super cheap. The price-to-earnings (P/E) ratio has toppled to 13 times from the 10-year average of 22–23.

So will I be buying Greggs shares for my portfolio? No, but that’s only because I already have a substantial holding. I think it’s a great share for investors to consider, and especially at today’s prices.

The post Buying £20k of Greggs shares could give me an £860 income this year! appeared first on The Motley Fool UK.

That sort of consistent downward trend suggests that much of the stock market does not share my bullishness about the outlook for the sausage roll purveyor.

So, while continuing to weigh up what I see as the attractive points of the investment case, I have also been thinking about whether I am missing or mis-sizing some of the possible risks.

Higher energy prices are bad news

For starters, there is the impact of the Middle Eastern war on energy costs.

Greggs has thousands of shops. It also has multiple large production facilities. Each uses some electricity.

Unlike a paper shop or ironmonger where the main electricity use is keeping the lights and heating on, Greggs’ entire business model involves baking. That requires heat – and lots of it, given that the company shifts millions of tasty food items each week.

Its electricity costs alone could eat significantly into the company’ s profitability this  year and beyond, I fear.

No AI pie in the sky — just pies!

Recent years has seen the prospect of some companies cutting large numbers of jobs as people get replaced by AI.

That seems unlikely to happen at Greggs, given the manually intensive nature of much of its business model.

The company has said that, at the head office level, AI functionality is “being developed to drive service standards and efficiencies”. But I reckon this will have modest overall impact on a business that has over 2,700 physical shop locations.

In a time of growing employment costs, due to wage rises and tax increases, that is also a risk to profitability.

Indeed, for this year the company expects that ”employment cost inflation will again be the biggest driver of higher costs”, even though that inflation may be lower than in the past several years.

Eating habits are changing

The growth of appetite suppression pills is potentially a significant disruptor to customer demand for certain types of food.

But that is only one of the risks that could eat Greggs’ lunch (while its customers stop eating their own!). Another is shifting eating habits more broadly.

Greggs has become ubiquitous through growing to thousands of shops and planning further ones, alongside rolling out frozen goods in hundreds of Tesco shops. That opens up an opportunity for regional rivals to try and take some of its market share with more innovative, localised product offerings.

Here’s why I’m hanging on

Still, I am a long-term investor and that informs my approach here.

Greggs’ like-for-like growth is modest – but it is still growth. Add new store openings to that and it become substantial.

The company has a proven business model, a powerful value proposition for customers, and is profitable. The fall in Greggs shares has pushed the yield up to a tasty 4.3%.

That is enough to keep me happy, as I hold on in the hope of long-term share price growth.

The post 3 risks to Greggs shares that could hamper a recovery appeared first on The Motley Fool UK.

Some might even be hopeful that we’re approaching the bottom of this painful downturn before the momentum reverses and a recovery rally kicks off.

So, is this a fantasy? Or are Greggs shares really getting ready to bounce back? Let’s investigate.

The bull case for recovery

While Greggs continues to navigate through a challenging UK consumer spending environment, the underlying business has several catalysts that pave the way for a steady recovery.

In 2025, the group’s capital expenditures reached a massive £287.5m. But in 2026, that number is expected to fall to around £200m, before falling further in 2027, following the completion of recent logistics infrastructure upgrade projects.

Even if sales growth remains stuck in single-digit territory, the sharp drop in planned spending alongside the reaping of rewards from its previous efficiency and capacity improvements translates into a potential inflexion point for free cash flow.

This not only better positions the company to absorb further inflationary input costs but also supports a recovery of profit margins. In other words, even if the top line is flat, the bottom line might be on track to deliver rebounding growth by the end of 2026. And, in turn, open the door to a potentially powerful share price recovery.

That’s why the analyst teams at Berenberg, RBC Capital, UBS, Barclays, and even JP Morgan have just recently reiterated on their Buy recommendations with updated share price targets ranging from 1,830p all the way to 2,090p.

Compared to where the stock trades today, that’s a potential return of up to 35% – enough to turn £5,000 today into £6,757.

What could go wrong?

Internally, the stage appears set for a free cash flow and partial margin recovery in 2026. However, when looking at external factors, there remains a lot of uncertainty.

The biggest headwind facing this business is the UK consumer. In fact, management has already warned shareholders that weak consumer sentiment will “continue to be a headwind in 2026”. And that was before oil & gas prices started spiking following the conflict in the Middle East.

With British household budgets already coming under pressure from the latest round of tax hikes, the addition of further macroeconomic headwinds doesn’t bode well for discretionary spending. And the GfK Consumer Confidence index is already starting to reflect this, having ended March at its lowest point since April 2025.

Is now the time to buy?

The operating landscape for Greggs remains challenging in 2026. If consumer spending does slow as expected, the progress made in margins and free cash flow may ultimately be offset, leaving bullish investors disappointed.

As such, 2026 looks more likely to be a year of stabilisation rather than a full-blown recovery. So, for investors operating on a short time horizon, Britain’s favourite bakery chain likely isn’t a great fit. But for patient long-term investors looking to invest early into a recovery play, Greggs shares could be worth keeping a close eye on.

The post Here’s what £5,000 invested in Greggs shares at the start of 2026 is worth today appeared first on The Motley Fool UK.

Problems under the bonnet

Let’s dig deeper into the latest financial results. While sales are still growing, profits are heading in the opposite direction. Underlying profit before tax fell by 9.4%. Factors impacting this were rising wage costs, higher packaging expenses, and heavy investment in new distribution centres. These have acted to squeeze margins, and it’s a classic case of a firm growing but earning less, which rarely excites investors.

On a different angle, growth quality is under scrutiny. What I mean by this is that much of the revenue increase is coming from opening new stores rather than strong like-for-like demand. Smart investors have spotted this trend as well over the past year. That raises a red flag because it could indicate that we aren’t seeing genuine demand expansion. This is even more compelling when I look ahead, given we have a cautious UK consumer right now, still being hit by cost-of-living pressures.

Lastly, more subtle structural concerns are creeping in. Some have pointed to changing eating habits, potentially hitting demand for high-calorie snacks (like the Steak Bake). Combine that with even some odd elements, such as weather volatility, and it becomes more apparent why Greggs’ shares have been underperforming for some time.

The direction from here

I’m not saying that Greggs stock is going to keep falling for years to come. There are promising signs. Market share is increasing, which is a very good sign that consumers are switching from alternative providers and going to Greggs. A steady stream of new customers helps long term. Even though some might not agree with it, the expansion strategy of pushing for more stores and longer opening hours does provide it with a larger footprint, which ultimately could boost profits once costs settle down. In addition, cost pressures that hurt 2025 results are expected to ease, potentially allowing margins to recover later this year.

The current price-to-earnings ratio is 13.4, which is above my fair value benchmark of 10 and above the FTSE 250 average ratio of 9.7. From that angle, I don’t see any immediate catalyst for the stock to rise. If anything, my view is for the stock to tread water until investors become convinced that profitability can be improved. In the meantime, the risks remain though. On that basis, I don’t think it’s a compelling purchase for me at the moment, but I have the stock on my watchlist.

The post Why isn’t the Greggs share price going up? appeared first on The Motley Fool UK.

According to Research Tree, the stock has the second-largest short interest in the UK. So are things set to get worse for the FTSE 250 firm?

Short interest

According to the latest data, the short interest in Greggs is 13.8%. In other words, there’s around £219m betting against the share price.

Only one firm has a higher percentage of its shares being sold short. That’s Wizz Air – an airline that operates flights to the Middle East.

That’s about as wrong-place-wrong-time as it’s possible to be right now. But beyond that, the next consensus choice is the bakery chain.

A high short interest can be worth noting. It can create dramatic results if the share price suddenly starts moving up. In that happens, investors who were betting against the stock have to buy it to cover their losses. And that buying can force the price even higher.

That’s partly why Wizz shares were up 16% on Wednesday (8 April). But what could get the Greggs share price moving in the right direction?

Challenges

Greggs has been facing a number of challenges recently. And the problem is, there’s not much it can do about a lot of them.

In the UK, the firm is getting close to its saturation point. In other words, it’s not going to be able to open that many more stores. That means further growth is going to have to come from higher like-for-like sales. And that metric has been very weak recently. 

A big reason for this is weak consumer spending in the UK. But that’s not something Greggs has any control over. 

On top of this, higher energy and staff costs have been weighing on margins. And without revenue growth to offset this, profits are falling.

That’s an extremely unhelpful combination of factors. The big question, though, is how long it’s going to continue.

Value

The Greggs share price has been falling due to slowing growth. As a result, the stock is trading at a much lower price-to-earnings (P/E) multiple.

The underlying business, however, hasn’t really gone backwards. And that might make it interesting for long-term investors. 

I think there’s actually a lot to like about the company. It offers outstanding customer value, which should have durable appeal. Not only this, but its scale means it has relatively low costs. So it’s able to make good money while charging low prices. 

That’s clearly a good thing, but the question for investors is what that’s worth. And a P/E ratio of 13.5 is an odd middle ground.

It’s not high, by any means. But there’s still scope for this to compress further in the short term if results don’t improve. 

What happens next?

The next update from Greggs is due in May. And investors clearly think there’s more disappointment on the way. 

This could be true. But accepting that there are short-term challenges is consistent with thinking the company has long-term strengths.

On that basis, investors might well think the stock is one to keep an eye on right now. Especially those looking past the next few months.

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