Greggs (LSE: GRG) shares look seriously mispriced to me, given its strong long‑term profit engines.
The market continues to overlook its consistent growth, strong margins and expanding footprint across the UK. Robust sales momentum, store expansion and rising customer demand all point to a business significantly outperforming its current valuation.
For investors, that disconnect could represent a meaningful opportunity to lock-in a great bargain now.
So, how much are we talking about here?
How does the valuation compare to peers?
To get a clearer sense of the bargain on offer, comparing Greggs’ valuations to its competitors is a useful start.
On the key price-to-earnings ratio, it trades almost bottom of the group at 12.9, against a hospitality/food-to-go peer group 15.5 average. These comprise Mitchells & Butlers at 8, JD Wetherspoon at 13.2, Whitbread at 18.7 and McDonald’s at 22.1.
It is also undervalued against them on the price-to-sales ratio — at 0.7 compared to the 2.3 group average.
Taken together, these metrics point to a business trading at a clear discount to its sector. To see just how wide that gap might be, a discounted cash‑flow (DCF) valuation gives a clearer picture.
What’s the stock’s true worth?
In my investment bank dealing days, I found the best way to pinpoint a stock’s true worth is the DCF model. It identifies the ‘fair value’ of any share by taking future cash flows for the underlying business and then discounting them back to today.
When those projections look less certain, the discount applied to them is increased. Differing assumptions here are a key reason why analysts DCF outcomes can sometimes vary.
However, my own DCF modelling shows Greggs shares are 56% undervalued at their current £15.46 price.
That points to a fair value of £35.14 — more than twice the present price.
The significance of that gap is huge for long-term investors because over time share prices tend to converge to their fair value.
What’s under the bonnet?
Ultimately sustained profit growth is the catalyst for share price gains in any stock. A risk for Greggs is the rising cost of living that could slow sales momentum. Another is increasing competition in the sector that could squeeze profit margins.
Nevertheless, analysts expect its profits to grow at a strong annual average rate of 14.2% to end-2028 at least.
Its latest trading update — for the first 19 weeks of 2026, released on 12 May — showed sales up 7.5% year on year to £800m. Forty-one new shops were opened, with the company targeting around 120 net openings this year.
Its full-year 2025 results published on 13 April saw record sales of £2.151bn.
My investment view
Greggs’ strong sales momentum, expanding shop estate and record revenues all underline the depth of its long‑term growth engine.
With profits forecast to rise sharply over the coming years, it looks well positioned to keep compounding its financial strength. And that should push its share price toward fair value over time.
For these reasons, I think the stock well worth investors’ consideration. As I already own a stock in the food sector — Marks and Spencer — it is not for me. But I have me eye on other deeply undervalued shares, some of which pay very high dividends too.
Should you invest £5,000 in Greggs Plc right now?
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Simon Watkins owns shares in Marks and Spencer.
