Look what a plummeting Greggs share price has done to £5,000 invested a year ago!

Over the course of decades, Greggs (LSE: GRG) has baked up some tasty treats for long-term shareholders. More recently, though, the Greggs share price has sunk like a poorly prepared soufflé.

What’s been going on – and is this a potential bargain, or perhaps a value trap?

Value destruction

Over the past 12 months, the Greggs share price is down by 22%.

The past half year has shown some recovery: it is up by 4% during that period. Indeed, since late November the Greggs share price has moved up by 18%.

Still, that 12-month price loss is painful. It means that someone who invested £5,000 a year ago would now be nursing a paper loss of around £1,100, so their stake’s current value would be down to about £3,900.

There have been dividends along the way.

The current yield is 4.1%, though someone who bought at the higher price 12 months back would be earning a lower yield. £5,000 invested a year ago should have generated roughly £161 of dividends since.

Even taking that into account, then, the investment would still be deep in the red.

Any lessons?

In a moment I will explain how I have reacted and what I think could happen from here.

But first I think it is worth noting a couple of observations relevant to an investor even if Greggs shares are not on their radar.

One is the importance of diversifying a portfolio.

A 22% drop in the Greggs share price is significant. But say Greggs was just one of ten evenly weighted shareholdings in different companies an investor held. Then, such a drop would amount to a fall of a little over 2% in the whole portfolio valuation.

Another point worth remembering is that, no matter how cheap a share may look, it can still move lower.

A year ago, the Greggs share price was already 37% below where it ended 2021 and may have struck some investors as a bargain. But look at what has happened to it since!

Still unclear where this might go

So, what is the situation now?

I am in the camp that the beaten down Greggs share price is a bargain. So I have built up a position in it. I did sell a few recently to help keep my portfolio diversified, but I still own the majority of my stake.

I like the company’s proven business model, strong value proposition for customers, economies of scale, and exposure to an area with ongoing customer demand.

But those things were all true a year ago – yet the share tanked.

Partly that was because of a profit warning last summer. Poor demand planning given the weather that materialised not only hurt performance, it also shook City confidence in management.

I see getting the product offering wrong as an ongoing risk. I reckon investors are also worried about market saturation eating into the business’s growth potential.

But Greggs is still growing sales. I think the current share price is attractive — and the dividend is tasty too!

The post Look what a plummeting Greggs share price has done to £5,000 invested a year ago! appeared first on The Motley Fool UK.

More reading

• Here’s how much income I can get if I invest my entire £20k ISA in Greggs shares
• Prediction: in 12 months, the battered Greggs share price and dividend could turn £10,000 into…
• Is it time to consider stone-cold Greggs shares?
• Here’s what £10,000 invested in Greggs shares at the start of this year is worth now…
• £15,000 invested in Greggs’ shares a year ago is now worth…

C Ruane has positions in Greggs Plc. 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.

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