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Greggs (LSE: GRG) shares look severely mispriced to me, given its robust lengthy‑time period revenue engines.
The market continues to miss its constant development, robust margins and increasing footprint throughout the UK. Strong gross sales momentum, retailer enlargement and rising buyer demand all level to a enterprise considerably outperforming its present valuation.
For buyers, that disconnect may symbolize a significant alternative to lock-in an ideal cut price now.
So, how a lot are we speaking about right here?
How does the valuation evaluate to friends?
To get a clearer sense of the discount on supply, evaluating Greggs’ valuations to its rivals is a helpful begin.
On the important thing price-to-earnings ratio, it trades nearly backside of the group at 12.9, towards a hospitality/food-to-go peer group 15.5 common. These comprise Mitchells & Butlers at 8, JD Wetherspoon at 13.2, Whitbread at 18.7 and McDonald’s at 22.1.
Additionally it is undervalued towards them on the price-to-sales ratio — at 0.7 in comparison with the two.3 group common.
Taken collectively, these metrics level to a enterprise buying and selling at a transparent low cost to its sector. To see simply how huge that hole may be, a reduced money‑stream (DCF) valuation offers a clearer image.
What’s the inventory’s true price?
In my funding financial institution dealing days, I discovered one of the simplest ways to pinpoint a inventory’s true price is the DCF mannequin. It identifies the ‘truthful worth’ of any share by taking future money flows for the underlying enterprise after which discounting them again to in the present day.
When these projections look much less sure, the low cost utilized to them is elevated. Differing assumptions listed below are a key motive why analysts DCF outcomes can typically range.
Nevertheless, my very own DCF modelling exhibits Greggs shares are 56% undervalued at their present £15.46 worth.
That factors to a good worth of £35.14 — greater than twice the current worth.
The importance of that hole is large for long-term buyers as a result of over time share costs are likely to converge to their truthful worth.
What’s beneath the bonnet?
Finally sustained revenue development is the catalyst for share worth beneficial properties in any inventory. A danger for Greggs is the rising value of residing that might gradual gross sales momentum. One other is rising competitors within the sector that might squeeze revenue margins.
Nonetheless, analysts count on its income to develop at a powerful annual common fee of 14.2% to end-2028 not less than.
Its newest buying and selling replace — for the primary 19 weeks of 2026, launched on 12 Might — confirmed gross sales up 7.5% 12 months on 12 months to £800m. Forty-one new outlets have been opened, with the corporate concentrating on round 120 internet openings this 12 months.
Its full-year 2025 outcomes printed on 13 April noticed document gross sales of £2.151bn.
My funding view
Greggs’ robust gross sales momentum, increasing store property and document revenues all underline the depth of its lengthy‑time period development engine.
With income forecast to rise sharply over the approaching years, it appears to be like properly positioned to maintain compounding its monetary energy. And that ought to push its share worth towards truthful worth over time.
For these causes, I feel the inventory properly price buyers’ consideration. As I already personal a inventory within the meals sector — Marks and Spencer — it isn’t for me. However I’ve me eye on different deeply undervalued shares, a few of which pay very excessive dividends too.
Do you have to make investments £5,000 in Greggs Plc proper now?
When investing professional Mark Rogers and his staff have a inventory tip, it may pay to hear. In any case, the flagship Twelfth Magpie Share Advisor publication he has run for almost a decade has offered 1000’s of paying members with prime inventory suggestions from the UK and US markets.
And proper now, Mark thinks there are 6 standout shares that buyers ought to contemplate shopping for. Wish to see if Greggs Plc made the checklist?
Simon Watkins owns shares in Marks and Spencer.
