£5,000 invested in Greggs shares 5 years ago is now worth more than you might think…
After an uninspiring 12 months (to put it politely) Greggs (LSE:GRG) shares suddenly came back to life on Wednesday (1 October). The stock jumped 7% in response to the firmâs Q3 trading update.
Itâs been a bumpy few months for the FTSE 250 bakery chain. But despite this, investors who have owned the stock for the long term and stayed with it have actually done ok.
Long-term investing
Five years ago, £5,000 was enough to buy 396 Greggs shares. And while itâs been an up-and-down journey since then, the stock is now 36% higher than it was in September 2020.
Thatâs enough to turn a £5,000 investment into something worth £6,800. But thatâs only part of the story â the company has also distributed £3.27 per share in dividends to its investors.Â
With 396 shares, that amounts to £1,295 â another 26% â which brings the total return to 62%, or 10% a year. On the same basis, the FTSE 250 as a whole is up around 46%, or just under 8% a year.
This hasnât been an accident — the company’s reputation for value and quality has been a key long-term strength. And the latest data indicates that this is still firmly intact.
Is the worst over?
The stock marketâs reaction to the latest update from Greggs was very positive, but I didnât see any real signs that the business is starting to recover. In fact, I thought the update was quite worrying.
The company increased its store count by 57 (130 venues opened and 73 closed) and total sales were up 6.1%. But adjusting for the new outlets, revenue growth was actually 1.5%.
This metric is extremely important because Greggs can only keep opening new stores for so long. Over the long term, growth is going to have to come from higher revenues in existing venues.
Not only is that below inflation, itâs the worst quarter of the year so far. During the first half of 2025, like-for-like sales grew 2.6%, with Q2 showing some signs of improvement on a poor Q1.
Why is the stock climbing?
Given this, itâs natural to wonder why the stock is climbing. I think the obvious answer is that investors were expecting worse and the share price reflected those expectations.
The company attributed its poor performance in Q2 to unusually warm weather and this has persisted through Q3. So investors might well have been pessimistic.
Going into the report, though, Greggs shares were trading at a price-to-earnings (P/E) ratio of 11. Thatâs the same as Associated British Foods, where Primark has seen like-for-like sales declining.Â
The stock also had a significant short interest before its Q3 update. And that means a rising share price might have caused investors betting against the stock to buy, pushing the stock higher still.
So where are we now?
Over the last five years, Greggs shares have been a decent investment. Weak like-for-like sales growth, however, makes me wary about the stock over the next five years.
Nothing in the latest update made me think the business is recovering from its recent struggles, rather than just surpassing low expectations. And thatâs why Iâm not looking to buy it right now.
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More reading
- No savings at 40? Consider targeting FTSE 250 shares to eventually turn £100 a month into £240k
- Greggs shares: is the worst over?
- Greggs’ share price spikes 8% following Q3 update! Is the fightback on?
- Hereâs what £1,000 invested in Greggs shares a year ago is worth now
- 3 reasons why Greggs shares could be set to bounce back in October
Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods Plc and 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.
