Greggs share price: is the market mispricing this UK favourite?
Iconic British fast-food brand Greggs (LSE: GRG) has seen its share price drop 42% in just over a year. I think this largely reflects weaker consumer spending due to costâofâliving pressures and rising business costs that have squeezed margins.
However, it continues to deliver steady sales growth, and its storeâexpansion programme remains on track.
Consequently, I do not believe the business has stalled, as its share price might suggest. Instead, I think it has shifted into a more mature phase.
Even in this mode, I believe it has much to offer a certain type of investor. So what exactly is that?
Solid dividend yield
Greggsâ current 4.2% dividend yield compares favourably to the FTSE 250âs 3.5%.
Analysts forecast a 69.4p dividend this year and 71.8p in 2027, implying yields of 4.2% and 4.4%.
So, investors considering a £20,000 holding would make £11,029 in dividends after 10 years. This reflects an average 4.4% yield, although this could change over time. It also assumes the dividends being reinvested back into the stock.
On the same basis, the dividends could potentially rise to £54,688 after 30 years.
Including the original £20,000 stake, the holding could be worth £74,688 and produce £3,287 a year in income at that point.
How have recent results looked?
A companyâs dividends, and share price, are ultimately powered by earnings growth. A risk for Greggs is a continued rise in the costâofâliving crisis reducing customer spending.
Nonetheless, its 2024 results, released on 16 April 2025, showed record sales of £2.14bn and record profits of £203.9m. It also overtook McDonaldâs as the UKâs top breakfast takeaway in 2023 and has retained that position.
In its H1 2025 update, total sales rose 6.9% year on year to £1.03bn. Management noted fullâyear operating profit may come in modestly below 2024 levels. However, it reiterated that the store expansion programme remains on track, with 120 net new openings targeted this year.
Its Q4 results saw total sales up 7.4%. It is due to release its full-year 2025 results on 3 March.
Capital appreciation potential
A major sign of confidence came in December, when JP Morgan initiated coverage of Greggs at Overweight. It believes the shares will outperform other stocks in the sector. It argued that âmore resilientâthanâexpectedâ sales and strong earnings from fiscal-year 2026 could drive a significant reârating.
Its base-case outlook assumes like-for-like sales growth of 2.5% this year, rising toward 3%-3.5% in subsequent years. Gross margins are forecast at 61.2% for 2026/27, improving to 61.8%.
Underlying earnings before interest and taxes margins are expected to climb from 8.4% in 2025 to 8.5% in 2027, approaching 9.8% by 2030.
Given these parameters, it placed a December 2027 price target of £21.10 on the shares — a 29% increase from the current £16.33 price.
These numbers reflect my own discounted cash flow modelling, based around the same earnings growth forecasts and a discount rate of 8.5%.
My investment view
Greggs is not for me at this stage of my investment cycle.
Over 50, I focus on shares offering much greater dividend yields to provide me with high income in retirement.
However, for investors earlier in their investment journey — particularly those seeking a blend of income, stability, and longâterm compounding — I think Greggs is well worth considering.
The post Greggs share price: is the market mispricing this UK favourite? appeared first on The Motley Fool UK.
Should you invest £1,000 in Greggs plc right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Greggs plc made the list?
More reading
- As Greggs’ share price dives, is this a once-in-a-decade opportunity?
- Down again after Q4 results, is this the new normal for Greggs shares?
- After dipping 40% in 2025, is now the time to consider this top growth share?
- Will the Greggs share price jump or slump on 8 January?
- Why is Greggs the most shorted UK stock?
Simon Watkins has no position in any of the shares mentioned. The Motley Fool UK has recommended Greggs Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
