Greggs‘ (LSE:GRG) share price has had a miserable 12 months. Down around 32% over the past year and sitting 30% below its 52-week high, the sausage roll king of the British high street has gone from stock market darling to something investors are quietly trying to forget.
So what’s going on and is this a diamond in the rough?
The numbers aren’t particularly positive
For a long time, Greggs was one of those rare consumer companies that made the financials look almost effortless. Revenues grew from £811m in 2020 to £2.15bn by 2025 — admittedly 2020 was the initial pandemic year.
However, the profit story has quietly deteriorated. Operating margins have compressed from a peak of 12.5% in 2021 to just 8.5% now. Normalised earnings per share fell 17% in 2025 to 119p.
Looking forward, analyst recovery forecasts don’t impress — around 125p in 2026 and 131p in 2027. That’s still shy of 5% annually.
What’s more, capital expenditure has been rising significantly. Capex has soared from 53p per share in 2021 to 278p last year — this is the cost of Greggs’ aggressive expansion and its drive into evening trading and delivery.
The consequence is that free cashflow has collapsed from a healthy 225p per share to just 50p. And the cash on the balance sheet has gone from nearly £200m down to £71m, while net debt has surged from £85m to £404m. That’s a fivefold increase in four years.
Cheap enough to consider?
The stock’s now trading at 12.4 times forward earnings. That might sound reasonable valued, but with earnings per share growth in the low single digits, the price-to-earnings-to-growth (PEG) ratio comes out at 2.8. This figure, if taken on its own, suggests an overvaluation.
Price-to-free cashflow sits at 31 times, which is hard to justify for a mature retail bakery chain facing margin earnings growth challenges.
And finally, the dividend yield may look attractive on first sight, but the coverage ratio now sits under two times (a benchmark for stability). Coupled with falling free cash flow, it’s not a pretty picture.
The bottom line
Above, I’ve run through all the concerns I have from a data perspective. But there are operational concerns behind all of this — some of them aren’t clear in the data.
Greggs built its cult following on cheap, cheerful, calorie-dense food — the 99p sausage roll is practically a national institution. But the direction of travel in British eating habits, however slowly and unevenly, is toward healthier options.
When that starts to impact the business in the near term or the long term, I don’t know. But Greggs, which is a great brand and a strong public image, is in an unenviable position of having to navigate a slow-motion identity crisis.
Given all of this, I don’t think it’s worth considering.
