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The Greggs (LSE: GRG) share price has followed a surprisingly erratic path for a company that just makes sandwiches, sausage rolls, and things like that.
I did notice that, despite the inflationary aftermath of the Covid pandemic, Greggs did a pretty good job of keeping price rises down as much as possible. As a regular customer, I was happy. But I wasn’t so sure it would be to shareholders’ liking.
My fears were well founded. By early 2025 we were hearing of subdued consumer confidence, cost inflation, headwinds… The first half this year saw higher sales, but lower profits. Earnings per share fell 16%. And from a peak approximately 12 months ago to today, the share price has cratered.
Hindsight
Looking back with hindsight, there were danger signs. The main one was the valuation of the stock, which had been running at a price-to-earnings (P/E) ratio close to 20, even above, for the past few years.
Greggs was a story stock, and people had piled in. Share valuations like that might be fair in the long term. But they leave little safety room to handle retail pressures and inflation. It’s only sandwiches and baked goods, not AI or biomedical research.
I feel for those who bought near the top and lost out. But I’m convinced a correction was needed. It makes me wonder whether this is a buying opportunity for those of us who stayed on the sidelines… and makes me ask where the share price is likely to go next.
As for what the brokers think, they’re predicting a 2,070p share price. At least, that’s the average of those I can find putting targets on the stock. And the range goes from around where it is now (1,536p late on 24 September), to about 3,000p. That’s a gain of anywhere between no change and a 95% rise.
Further ahead
So we have a very vague set of predictions. And some brokers have been cutting their targets. Let’s instead look at earnings forecasts out to 2027, which is as far as they go right now.
After an expected dip in earnings this year, the consensus suggests Greggs should get back to growth in 2026 and continue into 2027. What might a P/E in line with long-term indexes, say about 15, suggest about the Greggs share price?
It could mean a price close to 2,070p. And that’s bang in line with the target average.
If we go on this, we could be looking at a Greggs share price gain of around 35% between now and the end of 2027. And we could have dividends yielding close to 4.5% per year on top — the analysts expect those to keep going.
A decent return
I’d be happy if my investments could get me an average return like that over such a relatively short timescale. But then, we still haven’t seen the full effects of supply cost inflation.
And we really don’t know how investor sentiment will go. Can Greggs ever get back to story status? I wouldn’t bank on it. But these rough predictions mean I’m ready to consider buying.