Stock market

10% increase this year! Is Now Time for Investors to Consider Buying Greggs Shares?

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Greggs (LSE: GRG) shares have been one of the strongest performers. FTSE 250 during the last decade. Shareholders will also be pleased to see that the stock is up another 10% this year.

That beats the FTSE 250, which is up 6.2%. It has also outperformed the index over the five-year and 10-year periods, rising 29.6% and 451.4% compared to 7.7% and 30.9% respectively.

But with its share price soaring, where does that leave potential investors? Is there room for further growth? Or has the ship sailed? Let’s find out.

Challenges ahead?

When I look at Greggs, I see a few issues that could hinder the firm’s growth.

First of all, while the sausage roll maker has become incredibly popular over the past few years with its smart marketing, I can’t help but feel that when it comes to long-term eating habits So it’s swimming against the tide.

In recent years, there has been a greater emphasis on promoting healthy eating. People are more conscious of what they are putting into their bodies than ever before and the ultra-processed menu offered by Greggs is not conducive to a healthy lifestyle.

Second, the stock looks expensive. It trades at 20.7 times earnings. This is above the FTSE 250 average of 12. While it’s forecast to fall to 18.6 times by 2026, it still looks overpriced to me.

A flexible business

But then, Greggs is resilient. He has faced challenges before and overcome them. What’s to say it can’t continue to deliver?

For example, sales rose 19% to £1.8bn last year despite the cost of living crisis. A trading update in May showed the business had maintained that form in 2024, as sales rose 7.4%. As the business itself stated, it is currently “operating inChallenging situations“Nevertheless, it seems that it is perfectly fine.

Looking ahead, Greggs has no plans to slow down either. It opened 64 new stores during the first 19 weeks of the year. This takes his total to 2500. It should be argued that when budgets are tight, consumers will return to the cheap and cheerful goods of Greggs.

There’s also its delicious 2.2% dividend yield to consider. This is below the FTSE 250 average (3.2%). However, its payout is steadily increasing which is always encouraging to see. Over the past decade, the company has grown its profits by an average of 11 percent annually.

Time to buy?

But even after weighing it up, Greggs is not a stock I would buy today. We’ve seen the company grow from humble beginnings to a British stalwart. While that’s impressive, the stock seems a little too expensive for my liking.

I am also concerned about evolving social trends. It has proven its resilience. However, in the coming years and decades, I think we may see a major shift in consumer habits.

The FTSE 250 is home to many interesting businesses. So, I will be looking for my next purchase. I’ve got some interesting companies on my radar that I’ll be exploring in the coming weeks.

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