Last week, pastry maker Greggs (LSE: GRG) issued its interim results – and the FTSE 250 company’s share price soared. Greggs shares are now 22% higher than they were just a month ago.
Still, that leaves the share price 32% cheaper than five years ago.
So, could this still be a bargain?
No surprises – yet investors seemed surprised!
Let me start by putting my own cards on the table.
I took advantage of the share price surge to sell some of my Greggs shares. I kept the majority of my holding, but wanted to bank some profits while I could on this share that has had a rough few years.
Why did I sell at all?
I felt the market response to the results was irrational. Greggs delivered the sort of performance it had been signalling all along it would do.
In that sense, the results did not contain nasty surprises. Yet, the large jump in the share price following the results release suggests that investors were surprised.
How come? I reckon investors have become nervous about the possibility of Greggs disappointing them. Last summer’s hot weather prompted a profit warning and some investors may be concerned that this year’s warm summer could also hurt sales.
The mere absence of unexpected bad news helped allay such concerns, while refocusing attention on the growth opportunities that Greggs continues to have.
Is this a bargain?
Still, at around two-thirds of their cost five years ago, Greggs shares have a long way to go just to get back to where they were, as the chart below clearly shows.
Might they be a bargain?
Not necessarily. Just because a share has reached a price from the past is no guarantee that it will ever scale previous heights again.
Now trading at 15 times earnings, Greggs shares no longer look like a screaming bargain to me.
If there is bad news at some point, I think the price could go quite a long way down again. As well as changing weather, cost inflation is a risk for the firm.
It has also told investors that the second half of this year will see higher operating costs as a new distribution centre in Derby is opened.
As it has already explained that, in theory it ought to be factored into the current share price. But, based on the strong recent reaction to results that were in line with expectations, higher operating costs could lead some investors to sell, pushing down the share price.
I reckon it’s worth considering
Still, while I have reduced my holding, I plan to hang onto my current Greggs shares for the foreseeable future.
From a long-term perspective, I think the current share price could still offer value given the company’s growth prospects. That makes them worth considering, in my view.
Total sales in the first half were up, as were like-for-like sales in company-managed stores. The company reckons the UK market alone could sustain at least 3,500 shops over the long term, which is 26% above the current number.
With its proven formula, strong consumer value proposition, and large customer base, I remain confident Greggs can grow revenues and profits in coming years.
Should you invest £5,000 in Greggs Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Greggs Plc made the list?
Christopher Ruane owns shares in Greggs.
Last week, pastry maker Greggs (LSE: GRG) issued its interim results – and the FTSE 250 company’s share price soared. Greggs shares are now 22% higher than they were just a month ago.
Still, that leaves the share price 32% cheaper than five years ago.
So, could this still be a bargain?
No surprises – yet investors seemed surprised!
Let me start by putting my own cards on the table.
I took advantage of the share price surge to sell some of my Greggs shares. I kept the majority of my holding, but wanted to bank some profits while I could on this share that has had a rough few years.
Why did I sell at all?
I felt the market response to the results was irrational. Greggs delivered the sort of performance it had been signalling all along it would do.
In that sense, the results did not contain nasty surprises. Yet, the large jump in the share price following the results release suggests that investors were surprised.
How come? I reckon investors have become nervous about the possibility of Greggs disappointing them. Last summer’s hot weather prompted a profit warning and some investors may be concerned that this year’s warm summer could also hurt sales.
The mere absence of unexpected bad news helped allay such concerns, while refocusing attention on the growth opportunities that Greggs continues to have.
Is this a bargain?
Still, at around two-thirds of their cost five years ago, Greggs shares have a long way to go just to get back to where they were, as the chart below clearly shows.
Might they be a bargain?
Not necessarily. Just because a share has reached a price from the past is no guarantee that it will ever scale previous heights again.
Now trading at 15 times earnings, Greggs shares no longer look like a screaming bargain to me.
If there is bad news at some point, I think the price could go quite a long way down again. As well as changing weather, cost inflation is a risk for the firm.
It has also told investors that the second half of this year will see higher operating costs as a new distribution centre in Derby is opened.
As it has already explained that, in theory it ought to be factored into the current share price. But, based on the strong recent reaction to results that were in line with expectations, higher operating costs could lead some investors to sell, pushing down the share price.
I reckon it’s worth considering
Still, while I have reduced my holding, I plan to hang onto my current Greggs shares for the foreseeable future.
From a long-term perspective, I think the current share price could still offer value given the company’s growth prospects. That makes them worth considering, in my view.
Total sales in the first half were up, as were like-for-like sales in company-managed stores. The company reckons the UK market alone could sustain at least 3,500 shops over the long term, which is 26% above the current number.
With its proven formula, strong consumer value proposition, and large customer base, I remain confident Greggs can grow revenues and profits in coming years.
Should you invest £5,000 in Greggs Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Greggs Plc made the list?
Christopher Ruane owns shares in Greggs.
