Investors have just lost their heads over Greggs shares again. Why?

The British have a soft spot for Greggs (LSE: GRG), and the same goes for its shares. They attract an awful lot of attention for a FTSE 250 stock of its size. I put it down to that vegan sausage roll. What a marketing coup that was. Almost everybody I know has joked about it at one time or another. My daughter talks about having a ‘cheeky Greggs’, and some of her friends even own Greggs merchandise.

Greggs was once derided for selling stodge from the North, but now the whole country has fallen under its spell. I even had a steak bake and sausage roll phase of my own. I’ve calmed down now.

This FTSE 250 stock is red-hot again

Unlike its baked goods, Greggs shares became expensive. The price-to-earnings ratio climbed to around 23, and the dividend yield sank towards 2%. It didn’t last.

Sales held up nicely in the early stage of the cost-of-living crisis, as Greggs offered struggling shoppers an affordable treat on the high street. But as households felt the squeeze, even a trip to Greggs became a luxury for some. Growth slowed. The share price tumbled. The P/E dropped to around 12, while the dividend yield climbed back above 4%. Finally, Greggs looked cheap.

I even toyed with buying its shares at that price, but one thing held me back. I’ll come to that in a minute.

Because something remarkable has just happened. Greggs shares have jumped almost 20% in the last week. The P/E has raced back above 16, while the dividend yield has slipped to 3.5%. The catalyst was a strong set of first-half results published last Wednesday (29 June).

Greggs is a smart operator. That vegan sausage roll stunt came from a business that knows exactly where it’s coming from. And it knew how to respond to recent setbacks. It’s still opening new shops at pace and winning market share, while also keeping a tight grip on costs.

I just have one problem with this

First-half sales climbed 7.2% to £1.1bn, in line with expectations, while operating profit jumped 22.9% to £87m, £5m ahead of forecasts. Free cash flow swung from a £41m outflow a year earlier to a £74m inflow. No wonder the shares took off. Can they keep climbing?

There are still plenty of challenges. The UK economy remains sluggish. If oil prices keep climbing, the cost-of-living crisis could return with a vengeance.

On the other hand, Greggs has done some smart things, including locking in energy prices. Having a net cash balance always helps.

Here’s that thing that still worries me. Where exactly does Greggs go from here? There are only so many high streets in the UK. I know it’s expanding into railway stations, retail parks, and travel hubs, but even those opportunities are finite. I struggle to see the formula travelling overseas. It’s a British thing.

I can understand why investors are excited again. Personally, though, I’ll leave this one alone. There are cheaper treats on the FTSE 100 and FTSE 250, and I’d rather tuck into those instead.

Should you invest £5,000 in Greggs Plc right now?

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Harvey Jones owns shares in Greggs.