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The saying goes, “Hindsight is a wonderful thing.” Well, when it comes to hindsight, Greggs (LSE:GRG) shares, I wish I had bought some earlier!
Let's take a look at whether the sausage roll supreme is still one of the best stocks to buy.
The gravy train keeps rolling!
Greggs' growth story from a share price, profits, presence and returns perspective is fantastic. It's one of the reasons I'm a little gutted I didn't join the party sooner. However, I still put a lot of money in their till as I can't resist a sweet treat or baked treat from one of their stores, which I can't seem to stay away from no matter where I go.
Recent developments include the Greggs share price continuing its impressive rise, as well as some excellent trading news.
The shares have risen 31% in a 12-month period, from 2,365 pence at this time last year to current levels of 3,114 pence.
Interim results released at the end of July revealed an impressive 14% increase in the company’s total sales. To put it into context, this equates to £1 billion hitting the tills. I won’t comment on how much money I brought in here thanks to my personal sweet tooth! Plus, profits were up 16% compared to the previous period last year.
The present and the future
Today we'll look at some fundamentals to help me answer the question in the title of this article. I admit that the current valuation is a bit high for my taste. The stock is trading at a price-to-earnings ratio of around 23. Is growth already priced in? Could earnings be affected and dampen investor appetite? I'll keep an eye on this. However, I also think that sometimes you have to pay a premium for the best stocks on the market.
From a profitability perspective, a dividend yield of 3.34% is attractive, but nothing to write home about. This yield could increase, in line with the company's performance. However, I understand that dividends are never guaranteed.
Greggs doesn't seem to be resting on its laurels, as growth is firmly on the company's agenda. This is demonstrated by strategic partnerships with delivery giants including UberEats and Just eat to reach another market. It also continues to target key concessions such as travel hubs like train stations and airports. It has also extended opening hours to boost sales and revenue.
Risks and my verdict
I have two main concerns. The recent cost of living crisis has highlighted the need for consumers to stretch their budgets further. Cutting back on sweets could hurt Greggs' profits and returns if the current volatility continues over the long term. Continuing the trend of economic turbulence, wage inflation could mean rising prices, which could also hurt the company's competitive advantage. I will be keeping an eye on both issues in the future.
Personally, I think Greggs is an excellent investment and has a lot of growth ahead. It is certainly one of the best stocks to buy on the market. FTSE 250 Index index, in my opinion.
I'll be watching with interest to see if I can get a better entry point to buy some shares next time I have free funds.
