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I Greggs (LSE: GRG) share price has been favored by growth investors for a long time, and I really don’t understand why. Yes, it is a successful high street bakery chain, and it has become a regular favorite with customers.
But it’s a very competitive business, and it’s not really a very difficult business model to emulate. To see Greggs shares peak at a price-to-earnings (P/E) ratio of over 30 back in late 2021 was really big, I feel. That’s on top of some AI technology growth stocks.
Greggs’ share price is now less than 50% of that peak. And on Tuesday (3 March) we had a set of results for the full year 2025 which I think makes it look much better value. So what is expected?
Combined results
The results paint a mixed picture for 2025. Sales increased by 6.8% compared to 2024. But underlying profit before tax fell 9.4%, while basic earnings per share fell 10.7%.
However, all of this was very much in line with expectations. And at least operating cash flow improved, up 4.6% from last year. it paid out 69 % dividends.
The share price barely moved in response, but there are really no surprises here. Looking ahead, CEO Roisin Currie spoke optimistically of “easing inflationary pressures should provide some support to consumer spending and demand for convenient food on the go continues to support the market.“
Margins are squeezed
Greggs has been doing well in keeping, and growing, market share. And that, in part, comes from keeping prices as low as possible. But it is hurting margins, as Greggs’ profit margin is expected to fall to 8.7% in 2025, down from 9.7% last year. The company also faced inflation, which didn’t really help.
So what should we be looking for in the coming years? I expect steady growth, although not stellar. And as inflation cooled, I saw like-for-like sales pick up again.
If that happens, it will be more consistent with the trader’s predictions. They are frequently updated in the light of new findings. But I don’t expect a big change from this considering the big-as-expected result.
Analysts see minimum wages rising over the next few years, suggesting a P/E of around 12 by 2027 based on the current share price.
Is the measurement tight?
The problem for me is that I would be very happy to see that kind of rating today, hoping for a big drop in the next few years.
I expect a good recovery from Gregs. And the last few years have actually held something good as well.
We have seen that the food market is getting stronger, even in the face of the inflation we have experienced since 2020. The business’s move too much on price competition worries me, though.
I think investors would do well to consider Greggs shares now, especially if the steady gains continue. And we may see a new phase of growth in the share price. But for me, I see better value options.
