Greggs’ shares have jumped about 18% over the previous month, pushed by a robust first-half efficiency and renewed investor confidence. The bakery chain reported better-than-expected earnings, expanded its retailer community, and saved prices below management regardless of a troublesome client backdrop.
However with the value now larger, a key query stays: are the shares nonetheless undervalued?
Robust H1 2026 outcomes and progress drivers
Within the first half of 2026 (to 27 June), Greggs shocked traders with expectation-beating outcomes. Pre-tax revenue soared 19.7% to £76m and income jumped 7.2% to £1,101.5m. However most spectacular was the rise in working revenue, up 22.9% to £86.5m.
The improved outcomes had been supported by like-for-like gross sales which get pleasure from a 2.1% improve, pushed by new shops and grocery partnerships.
The corporate’s administration cited its fashionable menu improve as a key driver of the restoration. New objects akin to a hen roll and matcha drinks have resonated with youthful clients, whereas more healthy choices like a hen Caesar salad cater to evolving tastes.
The model’s first worldwide outlet at Tenerife South Airport has additionally had a “promising begin“, providing a low-risk take a look at of abroad demand.
On the operational aspect, Greggs joined forces with Boots, Marks & Spencer, and the Met Police to sort out shoplifting, a transfer that would assist defend margins. So reasonably than a conventional bakery counting on yesterday’s wins, it seems just like the enterprise is embracing a brand new and evolving future.
However what does all this imply for traders?
Valuation, dividends, and the five-year image
Regardless of the latest rally, Greggs’ shares are nonetheless down roughly 38% over 5 years. That leaves plenty of room for restoration if earnings proceed to compound.
On valuation, the shares commerce at a ahead price-to-earnings (P/E) ratio of round 14, beneath its personal historic common and that of rivals. That’s engaging for worth traders, and it’s backed by analyst’s earnings assumptions. Utilizing a reduced money move (DCF) mannequin, some estimate the shares might be undervalued by as a lot as 51% — so expectations are excessive.
For revenue traders, the dividend stays the core attraction. With a reiterated 19p per share interim dividend, its full-year payout for 2026 will seemingly stay at 69p per share. That suggests a trailing yield of roughly 3.7%, with a payout ratio round 53%, there’s sufficient scale for modest will increase if money move holds up.
- Ahead P/E: 14.2.
- Dividend yield (trailing): 3.7%.
- Payout ratio: 53%.
- 5-year value change: down 38%.
However all that also depends on UK client confidence. If value inflation eats away at earnings, or gross sales decline, Greggs might battle to repeat these numbers. That places future dividends in danger.
Why Greggs deserves a more in-depth look
In my view, after I see a high quality inventory buying and selling effectively beneath its long-term excessive, it’s price taking a more in-depth look to seek out out why.
Taking into consideration the valuation and dividends, I believe Greggs seems engaging proper now and deserves consideration by each worth and revenue traders. The mixture of an inexpensive a number of, a strong yield, and a well-planned roadmap makes it a wise core holding for a diversified UK revenue portfolio.
As at all times, allocation issues. Finest follow suggests sizing a place based mostly on danger tolerance and diversification, then monitoring upcoming buying and selling updates to regulate accordingly.
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Mark Hartley owns shares in Greggs.
