Greggs actions are still cheaper. Could they be a value trap?

Recently I bought some actions in Baker Greggs (LSE: GRG) to what seemed like a tasty price. That occurred after the results of the company all the company disappointed the city because the signs of sales growth slow down.

For me, it seemed that the results also contained many good news and I thought that participation was a possible offer. Since then, however, what happened?

The part has fallen even more!

In fact, today (March 31), it reached a new minimum of 12 months. Of course, it is still 15% higher than five years ago. But the price is 45% Next, where I was as recently as September.

A fall in the price of shares could mean that Greggs is now even more a potential bargain than when I invested and should consider buying more shares.

But it could also be a red flag that this is what is known as a value trap.

Some common value trap elements

A value trap is exactly what it seems: an action that seems cheap but in fact it turns out not to be, since a price of the shares is already beyond.

Greggs actions at this time show some signs commonly seen in value traps.

On the one hand, the assessment seems quite cheap. Specifically, the price / profit ratio of 12 does not seem to me a well -established and profitable company with a proven business model.

In addition to that, Greggs has been very well in the past, increasing its sales and building a strong customer loyalty. Many value traps look cheap because the business has a solid performance history. But, of course, what has happened before is not necessarily an indicator of what is about to come, and a company that was once very easy can use a long time in a short time.

I see a long -term bargain

There are risks for Greggs, no doubt.

Its store opening program has added sales volumes, but it costs money to build and adjust stores. As the front streets continue to fight, parts of the Greggs store could face difficulties in maintaining their current levels of visits to customers in the coming years.

However, in general, I believe that the best days of the company are probably ahead. Its business is simple and the benefits of scale economies that can grow over time, for example, since it opens more centralized production facilities.

I think that the demand for affordable food will remain high in the long term. Greggs has developed a unique menu of products at competitive prices that help him satisfy that need. By expanding your business to night trade, it is able to make better use of existing assets that historically have been used more early in the day.

While the city has worried about lower growth rates, Greggs hopes to continue growing, and remains solidly profitable.

For me, Greggs actions do not seem a value trap as much as a possible long -term offer. If I have cash to invest in April, I will consider buying more for my portfolio.