Greggs (LSE:GRG) is one of my best stocks to buy now. In 2022 to date, and after a trading update, the share price has dropped. Could this present an opportunity to buy shares for my portfolio cheaper than usual? Let’s take a look.
Share price drop
I think Greggs is a quality business. It is the largest bakery chain in the UK, with approximately 2,000 locations. Greggs specialises in savoury products such as bakes, sausage rolls, and sandwiches, as well as sweet treats. I must admit I am a long-term customer and admirer of Greggs products.
As I write, shares in Greggs are trading for 2,936p per share. At this time last year, the shares were trading for 1,816p, which is a 61% increase. Greggs has seen its shares soar since the market crash. The shares have actually dipped since the turn of the year, however. At the end of 2021, the shares closed at 3,337p. So what’s happened and why? Do I still rate Greggs as one of my best stocks to buy now?
Trading update and outlook ahead
Greggs released a Q4 trading update last week which made for positive reading overall. It reported that FY 21 sales surpassed 2019 pre-pandemic levels. It also said two-year sales growth for FY21 was 5.3%. An announcement of full-year results would be ahead of expectations. Q4 itself saw a like-for-like growth figure of only 0.8% compared to 2019 and down 3.3% for the full year. From an operational perspective, Greggs has opened 131 new stores and closed 28 stores.
The outlook ahead for Greggs seems positive too. It has a healthy balance sheet with close to £200m in cash and is looking to continue its expansion and growth journey through new stores in new locations.
I believe the Greggs share price has dipped due to ongoing economic pressures as well as the reported lack of like-for-like growth sales reported. The sales figures are nothing to worry about for me personally. I am also not concerned by the share price drop longer term too.
Macroeconomic figures are more of a worry and risk, however. The well documented supply chain crisis, shortage of HGV drivers affecting operations, and rising costs have put many businesses under pressure. Greggs is no different. These are factors that could affect its future progress too.
Still one of my best stocks to buy now
There are challenges ahead for Greggs in the shape of some of the factors mentioned above but I think it can navigate them successfully and continue performing well. It has a good track record of performance. Although past performance is not a guarantee of the future, I use it as a gauge when assessing investment viability. In addition to this, it has a healthy balance sheet should it be faced with stormy waters. Furthermore, it wants to continue to expand and grow which is pleasing to see.
I still think Greggs is a quality business and one of my best stocks to buy now. At current levels the shares look even more attractive to me and I would add shares to my portfolio.
Jabran Khan has no position in any of the shares mentioned. 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.
