There could also be many tasty issues in a department of baker Greggs (LSE: GRG) – however what concerning the shares? The Metropolis has misplaced its urge for food for the corporate, with the price of Greggs shares dropping by 34% over the previous yr.

However I see rather a lot to love right here and haven’t any plans to promote my Greggs shares. Listed here are three the reason why.

1. Confirmed enterprise mannequin

Any investor price their salt is aware of that previous efficiency just isn’t essentially indicative of what’s going to occur in future.

However that doesn’t imply it’s irrelevant. In reality, usually when shopping for shares one factor I contemplate is whether or not an business and a particular firm have a confirmed enterprise mannequin.

Greggs has honed its enterprise mannequin over many years. It understands what prospects need, it is aware of how to predict demand, produce and distribute the products, and it is aware of what kind of pricing permits it to show a revenue whereas preserving prospects coming again for extra.

2. Distinctive place out there

At first look, there might appear to be nothing outstanding about Greggs that units it other than every other baker. However, as I see it, the corporate has a number of aggressive benefits.

One is economies of scale due to its giant property of outlets. In an business that’s nonetheless extremely fragmented, that may supply a monetary edge.

One other is Greggs’ monitor document of growing distinctive merchandise and making a advertising buzz round them. That may give it pricing energy.

I additionally like the best way Greggs has been getting artistic about its position in prospects’ consuming habits. It has expanded into breakfast and night meals, past the lunchtime rush that was its historic energy. That helps it utilise fastened belongings like outlets and ovens in a cheaper method.

3. Numerous area to develop

Rising the variety of meal events it targets is figure in progress. That might supply Greggs a number of area to broaden.

However I additionally see different potential alternatives for the corporate to develop its enterprise. Inside the UK there are many areas that it has but to broaden into totally. I reckon the confirmed enterprise mannequin may simply be exported or franchised in choose different markets abroad.

Moreover, Greggs may broaden right into a wider vary of product areas, constructing on the truth that a number of prospects frequently work together with it. One instance is the progress it has made in recent times increasing the position of sizzling drinks like espresso in its gross sales – and I believe there might be extra such alternatives left to discover.

A tasty-looking share price

However whereas I’m bullish concerning the outlook, the shares have tumbled in price.

Weaker client spending threatens gross sales. Progress efforts proceed to require expenditure, probably consuming into income. One other danger to profitability is the impression of upper tax prices and wage payments from this month onwards.

Nonetheless, as a long-term investor, Greggs shares look low cost to me. I plan to hold onto mine.