Greggs (LSE: GRG) has been growing in recent years, with ongoing shop openings facilitating record sales revenues. But Greggs shares have had a choppy few years, due to concerns including cost inflation and the impact of hot summer weather on customer demand.
Last summer saw hot weather leading to the company issuing a surprise profit warning on the back of weakened sales, sending the share price tumbling.
But some investors used that as an opportunity to buy at what they saw as a bargain price, given the company’s profitability and ongoing sales growth.
Here’s what’s happened in 12 months
Over five years, Greggs shares have lost two-fifths of their value. That is painful for long-term shareholders.
Meanwhile, the past year has seen a 15% increase in the share price.
That is little better than the 14% increase over that period in the FTSE 250 index, of which the baker is a member.
Still, even though the growth is broadly in line with the index, it is still welcome news for owners of Greggs shares such as me. £3,000 invested a year ago would now be worth around £3,450.
Capital gains are not the only thing of note here when it comes to shareholder returns, though.
The current Greggs dividend yield is 3.8% — again, better than the FTSE 250 average of 3.2%. Someone who invested £3,000 a year ago should now be earning roughly £130 per year in passive income thanks to Greggs dividends.
Is there still an opportunity here?
Sharp-eyed readers will have noticed that, even though things have been on the up over the past 12 months, Greggs shares still have not got anywhere close to their price of five years ago.
Not only that, but an initially strong reaction to last month’s interim results has largely fizzled out.
The share price moved up by 20% in just two days following the results. But it has since fallen 11%.
That still means the share is more expensive than it was before the results were published. But could the price now potentially be a bargain?
Lots still to prove
I think it could be – but with some caveats.
Indeed, I sold some of my Greggs shares following the results to bank some profits precisely because I felt the reaction looked overdone.
At 14 times earnings, I do not see the current share price as a screaming bargain. However, given its strong brand, proven business model, and large shop estate, I think Greggs may do well over the long run.
However, the short- and medium-term challenges are real. Warm temperatures in parts of Britain this summer again raise a risk that consumers’ minds will not think of Greggs as fast as they otherwise might when looking for food or drinks.
So, I do see this as a share worth considering, from a long-term perspective.
As for me, I am content to hang onto my remaining stake as a big enough investment for now and have no immediate plans to buy more shares. I prefer to wait until the summer is firmly over to learn what if any impact it has had on Greggs’ sales.
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Christopher Ruane owns shares in Greggs.
This story originally appeared on Motley Fool
