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Sadly, when Newcastle United defender Dan Burn was born, the London Stock Exchange hadn’t introduced its SEAQ (Stock Exchange Automated Quotation) system — that would happen in 1993. However, I believe Greggs (LSE:GRG) shares were changing hands for around 50p per share when Dan Burn was born. The stock is up 3,870% since then.
Clearly, both the sausage roll maker and now-England centre back have come good over the past 33 years. And if an investor had placed a £1,000 investment into Greggs when Dan Burn was born, they’d now have £39,700. That’s quite the return.
Why has Greggs performed so well?
Greggs has performed exceptionally well over the past 30 years due to its ability to adapt and reposition itself in a changing retail landscape. Originally a traditional bakery, Greggs shifted its focus to become a leading food-to-go chain, targeting on-the-go consumers rather than competing directly with supermarkets.
This strategic move was crucial, as it allowed the company to expand its offerings, such as hot drinks, breakfast items, and marginally healthier choices, meeting evolving consumer demands and broadening its appeal.
Greggs also excelled at maintaining affordability and accessibility, opening stores in high-traffic locations like train stations and airports, which helped drive consistent growth even as other high street retailers struggled.
The brand’s strong community roots, commitment to value, and willingness to innovate — evident in popular launches like the vegan sausage roll — have cemented its reputation as a staple of British food culture, leading to rising sales and sustained profitability.
What about now?
As some of you will know, I’m not the biggest fan of Greggs stock. And the reason is simply the valuation.
Looking ahead, Greggs is set to experience a fall in earnings in 2025 but a recovery in the years after. In 2025, the company’s price-to-earnings (P/E) ratio is forecast at 14.7 times earnings, with earnings per share (EPS) projected to reach £1.35. The dividend per share is anticipated to be £0.6803, resulting in a dividend yield of 3.42%.
Moving into 2026, Greggs’s P/E ratio is expected to decline slightly to 14.3, reflecting continued earnings growth. EPS is set to increase to £1.394, while the dividend per share rises to £0.701. This progression lifts the dividend yield to 3.53%. It’s a modest but important increase.
By 2027, the P/E ratio is projected to fall further to 13.7, with EPS rising to £1.447. The dividend per share is forecast at £0.7402, pushing the dividend yield up to 3.72%.
The problem is the earnings growth and the dividends aren’t enough to satisfy the P/E ratio in my view. In fact, a dividend-adjusted P/E-to-growth (PEG), even excluding this year’s reversal in earnings, is wholly unattractive and well over two.
Personally, it’s not a stock I’m considering. It may, however, given its rising dividends, be right for other investors. I’m also a little concerned about the longevity of its baked goods’ popularity in an increasingly health-conscious environment.
