Greggs (LSE:GRG) shares have long beaten the average returns of the FTSE 250 (the mid-cap index the bakery chain is part of). And in recent years, the firm’s budget-friendly and convenient offerings have proven increasingly popular during the UK’s cost-of-living crisis.
So it’s no wonder the stock has risen almost 18% since January 2023. When you add in the dividends over this period, it means that investors who bought £5,000 worth of shares two years ago have about £6,317 now.
By comparison, the same investment into a FTSE 250 index tracker over this period would only have reached £5,800 (including dividends).
But the question for me as shareholder is, can Greggs stock continue to deliver in future?
Go-go Greggs
Over the past decade, Greggs has expanded well beyond the declining British high street. I can grab one of its sausage rolls or cakes in train stations, airports, service stations, retail parks, and inside an increasing number of supermarkets. Anywhere people are on the go, basically.
Meanwhile, the food is also available for delivery on both Just Eat and Uber Eats. Sales through this channel represented 6.7% of company-managed shop sales in H1 2024, up from 5.3% in H1 2023.
The shop count has risen from 1,650 in 2014 to 2,559 at the end of September. Over this time, revenue and profits have increased around 150%.
New king of breakfast
In early 2024, Greggs officially overtook McDonald’s to become the UK’s most popular breakfast-to-go destination. Considering the US fast-food giant’s market cap is around 60 times larger than Greggs’, that’s a notable achievement.
I used to visit a McDonald’s drive-through for the odd breakfast. But I think the firm made a hash of its aggressive price hikes a couple of years back. Basically, I didn’t find much value waiting in a long queue of cars to pay noticeably more than before.
However, my experience does serve as a bit of a cautionary tale for Greggs. It highlights the juggling act it has to perform, balancing price increases to offset higher costs (including inflation and higher staff wages) while retaining customers and sales.
Moreover, as economic conditions stabilise over the next couple of years, customers who have turned to Greggs for its affordable breakfast and lunchtime meals may begin to shift back to restaurants or cafes with higher price points.
What about the future?
That said, I’m bullish on the bakery chain’s long-term growth prospects. More shops are opening later into the evenings to catch the drinkers, socialisers, and people heading home hungry after a late shift.
Couple this with the ambitious store roll-out programme — Greggs is targeting significantly more than 3,000 shops over the long run — and I think the stock is set up nicely for more gains in future.
Right now, it’s trading at a forward price-to-earnings (P/E) ratio of 19. That’s about in line with its historic P/E multiple, suggesting the shares aren’t overpriced. There’s a 2.6% forward-looking dividend yield too.
I’m considering adding a few more Greggs shares to my portfolio in early 2025. I think it’s an extremely well-run business that deserves a closer look from investors today.
The post £5,000 invested in Greggs shares at the start of 2023 is now worth… appeared first on The Motley Fool UK.
But this isn’t the only opportunity that’s caught my attention this week. Here are:
5 Shares for the Future of Energy
Investors who don’t own energy shares need to see this now.
Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.
While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.
Open this new report — 5 Shares for the Future of Energy — and discover:
Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
How to potentially get paid by the weather
Electric Vehicles’ secret backdoor opportunity
One dead simple stock for the new nuclear boom
Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!
Grab your FREE Energy recommendation now
More reading
5 stocks Fools have bought for growth and dividends
3 ISA strategies to consider in 2025
Ben McPoland has positions in Greggs Plc and Uber Technologies. The Motley Fool UK has recommended Greggs Plc, Just Eat Takeaway.com, and Uber Technologies. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
