The pandemic was a strange time for Greggs (LSE: GRG) shares. In 2020, the share price dropped from a January high of nearly £24 to a September low of £11. The threat of extended lockdowns and shuttered bakeries halved the firm’s value for a total loss of nearly £2bn in market capitalisation.
If I’d spotted an opportunity with these battered shares, what might I have made from it?
Up triple
The recovery didn’t take long. A vaccine arrived the next spring and drew the curtains on the worst of the Covid-related troubles.
The share price, probably below its true value, went on a tear. Today I could buy in for around £32, up nearly triple from that virus-fuelled low. A £10,000 stake at that time would have turned into £27,675 today. Not bad.
But there’s more to the story than simply shaking off a bug. Competitors haven’t prospered nearly as much over the same time span. Domino’s shares are down since the pandemic. Owner of Beefeater and Brewer’s Fayre Whitbread shares are up but only by 31%. Even global fast food kingpin McDonald’s is up just 32%.
Greggs seems to have uniquely prospered. Why is this? And are the shares a must-add to any growth-hungry portfolio?
To buy or not to buy?
Cheap prices are one reason. The shares lifted as pandemic threats were clearing, but it was also as a cost-of-living crisis emerged. British belts started to tighten and British wallets opened for sausage rolls and steak bakes that could, back then at least, still be bought for a pound coin.
Even now, Greggs is one of the new places on the high street you could walk into with a fiver and come out with a hot meal.
Tasty prices have been paired with seriously shrewd management too. An expansion plan is under way and the latest data shows the firm is on track for 140-160 new stores in the calendar year. Growth in existing stores has been helped by expanded opening hours, pushed back to 8pm in some stores.
Management hasn’t even limited its ideas to food, teaming up to do a Primark collab selling Greggs-branded merch. I never thought I’d see the day when young ‘uns dress up in clothes with the name of a high street bakery on, but here we are.
With the firm firing on all cylinders, the question really is one of valuation. Greggs trades at 24 times forward earnings which seems very expensive by UK standards (the FTSE100 average is close to 12 times at present). However restaurants are unlikely to go away and Greggs seems to be on a better upward trajectory than any other. With a somewhat cheaper entry point I think this would be a stock I’d buy.
The post If I’d invested £10,000 in Greggs shares during the pandemic, what would I have now? appeared first on The Motley Fool UK.
Like buying £1 for 31p
This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
See the full investment case
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1 FTSE 250 growth share I’d spend the rest of my life with
John Fieldsend has no position in any of the shares mentioned. The Motley Fool UK has recommended Domino’s Pizza Group Plc and Greggs Plc. 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.
