At £20.86, Greggs‘ (LSE:GRG) share price has plummeted in recent months, reflecting a sharp slowdown in its sales growth.
The former star baker has fallen more than 33% in value since late August, with most of the carnage coming after a shaky trading statement in early January.
The sausage roll specialist may remain under pressure if consumers keep the pursestrings tightened. But City brokers aren’t nervous. Broadly speaking, they think this FTSE 250 stock will rebound substantially during the next year.
38% increase expected
Some analyst forecasts for Greggs’ share price over the next 12 months do vary considerably. The most bearish prediction suggests the stock could decline a further 17% by February 2026, dropping to £17.33 per share.
On the other hand, the most optimistic analyst expects the baker to climb to £40.40 per share, representing a 94% increase from current levels.
Largely speaking, forecasts are overwhelmingly positive, with broker consensus implying that Greggs shares could appreciate 38% from today’s subdued levels. The average price target among 13 analysts covering the stock stands at £28.70 per share.
Value for money?
If these estimates are accurate, someone who buys Greggs shares today stands to make gigantic returns over the near term. Shareholder gains are also likely to be boosted by more tasty dividends. Greggs’ dividend yield for 2025 is currently a decent 3.3%.
Having said that, it’s important to bear in mind that — even after their price crash — Greggs shares don’t look especially cheap. This could limit any share price gains, and especially in light of how weak current market confidence in the stock is.
On the one hand, the company’s forward price-to-earnings (P/E) ratio of 15.1 times is below its decade-long average of 16.5-17 times. Its price-to-book (P/B) value has also fallen to multi-year lows, at 4.3.
However, this latter reading still sails above the widely regarded value benchmark of 1 and below. Greggs’ forward-looking price-to-earnings growth (PEG) multiple, at 4.5, is also high, on paper.
Given that its growth prospects have dimmed of late, I feel Greggs could struggle to rise and reclaim its premium P/E ratio in the near term. I don’t expect newsflow to improve any time soon that could reinvigorate its earnings outlook.
A fallen stock to consider
Yet while I’m not convinced Greggs’ share price will rebound in 2025, this doesn’t mean I think it’s a poor stock for investors to think about buying. Over the long term, I believe the company will remain a strong performer.
Since 2015, its share price has risen by a solid 139%. This has been driven by an ongoing store expansion programme that’s supercharged sales growth, and which has a lot more in the tank.
Greggs has around 2,600 stores on its books, and plans to raise the number even further to 3,500. Recent investments in supply chain capacity should help the company to hit this target too.
The baker also has other levers to pull to generate long-term profits growth. These include greater evening trading across its store estate, and growth across the delivery and click & collect segments.
I wouldn’t be surprised to see more near-term turbulence for Greggs shares. But over a longer time horizon, I expect them to recover strongly.
This post was originally published on Motley Fool
