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For a while, investors were making a small fortune out of Greggs (LSE: GRG) shares. The bakery chain was flavour of the month among users on The Motley Fool, attracting attention far beyond its status as a medium-sized FTSE 250 stock.
Part of that was down to impressive growth as Greggs saturated UK high streets and expanded into supermarkets, retail parks, railway stations, and even airports. The group’s marketing was just as impressive. The Greggs vegan sausage roll became a joke we could all sink our teeth into.
Growth stock falls
At their peak, roughly in the summer of 2024, the shares topped 3,000p but were getting expensive, with the price-to-earnings (P/E) ratio heading towards 25. The trailing dividend yield slipped towards 2%. I wrote about Greggs regularly but decided investors were pricing in more growth than it could realistically serve up.
Then the cost-of-living crisis bit. Even a cheeky treat from Greggs became too costly for many households. Sales continued to rise, but at a slower pace from October 2025. And that was all it took to change sentiment.
The Greggs share price has now slumped 38% over two years and 21% over 12 months. It’s also made a poor start to 2026, falling 6.5% in the last week alone, despite the board reporting a rise in fourth-quarter sales on 8 January. Investors turned their noses up at guidance that profits are expected to be flat this year as consumers struggle.
So have investors swung from being too greedy for Greggs’ shares, to overly sniffy?
Lower valuation, higher yield
Total 2025 sales still rose 6.8% to £2.15bn, although like-for-like growth at company-owned stores was a more modest 2.4%. That still represents “good progress” in challenging times, according to CEO Roisin Currie. She said new store openings should drive further growth.
Consumer stocks tend to be cyclical and even Greggs hasn’t escaped the current downturn. Yet the shares look cheap. The P/E ratio has plunged to 10.8. There’s more income too, with a trailing dividend yield climbing to 4.25%, comfortably covered twice by earnings.
Are we looking at an opportunity to buy into the Greggs growth story at a much lower valuation? That question answers itself. Compared with 18 months ago, the answer is clearly yes.
One-year consensus forecasts produce a median share price target of 1,868p. If achieved, that’s a gain of 15.75% from today’s 1,614p. Add in the dividend, and the total return could hit 20%, turning a £10,000 investment into £12,000. Even JPMorgan is now Overweight, setting a December 2027 target of 2,110p. That’s up 30% from today.
Volatile times
This really does look like a once-in-a-decade moment. The shares are now drifting back towards levels last seen in 2018. That’s a dramatic reversal for a business that remains profitable, cash-generative, and still expanding.
So yes, I think the shares are worth considering. My major concern is growth. Greggs must be nearing the limits of UK expansion. There are only so many outlets Britain can stomach. And I’m not convinced there’s a vast global market for Corned Beef Bakes or All-Day Breakfast Baguettes.
This is a rare opportunity to buy into the Greggs story at a far more reasonable price. I just don’t think that story is quite as compelling as it was.
