The Greggs (LSE:GRG) share price has made an terrible begin to the yr. Solely months in the past, the inventory was breezily altering arms above £31. As we speak, it’s buying and selling under £18 because the enterprise battles a plethora of challenges.

So, does the FTSE 250 sausage roll retailer now provide an affordable funding alternative? Or have Greggs shares grow to be a stale worth entice to keep away from?

Let’s discover.

A bitter style

At first look, the collapse within the Greggs share price would possibly seem unwarranted. Income handed £2bn for the primary time final yr and pre-tax revenue rose 8.4% to achieve £204m. These seem like stable numbers, so what on earth’s occurring?

Effectively, the inventory market’s usually described as forward-looking. Basically, previous outcomes are yesterday’s story. What really issues are the clues they’ll present buyers a couple of agency’s future development trajectory. On this entrance, there are a number of complications for Greggs shareholders.

Like-for-like gross sales development has slowed to a snail’s tempo, inching simply 1.7% increased within the first 9 weeks of 2025. The corporate cited “challenging weather conditions” in January as an element behind the deceleration. It’s hardly ever an excellent signal when a agency’s reaching accountable the British winter for an underwhelming efficiency.

As well as, the Newcastle-based enterprise warned that margins might be compressed in 2026 and 2027, impacted by investments in manufacturing, logistics, and distribution. To compound difficulties, will increase to the Nationwide Residing Wage and an increase in employer’s Nationwide Insurance coverage contributions add inflationary strain, which may damage the underside line.

Essentially, it appears the wind has been taken out of the agency’s sails. The Greggs share price has traditionally loved robust constructive momentum, propelled by fast development throughout a number of metrics. Within the cutthroat food-to-go market, the corporate can in poor health afford to take a breather whereas rivals snap at its heels.

Silver linings

Though issues could appear gloomy for Greggs, there are countervailing causes to be optimistic. Affected person buyers should be rewarded given the board stays bullish that it will probably return to its earlier development trajectory in the long run, even when it takes just a few years.

Plus, there was a saving grace for buyers who prioritise passive earnings. The group’s boosted its full-year dividend by 11% to 69p per share. Dividends are properly lined at two occasions anticipated earnings, offering shareholders with a good margin of security.

From a valuation perspective, the Greggs share price additionally seems extra engaging right this moment. The ahead price-to-earnings (P/E) ratio has lowered significantly relative to the inventory’s historic common. Trading at a a number of of 13 occasions ahead earnings, there’s a reputable case to be made that the shares are low cost right this moment.

Lastly, formidable long-term growth plans to function greater than 3,000 UK shops point out that there may nonetheless be room for additional development. In 2024, the enterprise celebrated opening its 2,600th store and it goals to ship 140 to 150 new shops this yr.

My take

I’ve been impressed with Greggs’ enterprise prior to now, however the newest outcomes have given me pause for thought. Though the inventory seems low cost right this moment, I’m reluctant to speculate till I see concrete proof that the agency can return to its glory days. General, I see higher funding alternatives elsewhere.