After falling by 40% in six months, the Greggs (LSE: GRG) share price is trying deeply unloved. Buyers have taken fright because the sausage roll specialist has reported slowing gross sales progress.

It’s not a reasonably image. However the inventory market is thought for its dramatic temper swings. Has the latest sell-off gone too far? I can actually see some causes to assume so.

On a ahead price-to-earnings ratio of simply 14, my research suggests Greggs shares are at present cheaper than they’ve been for 10 years.

The corporate’s working revenue margin additionally stays above common for this sector, at 10%. Environment friendly operations and an absence of financial institution debt helped the enterprise generate a return on fairness of 28% final 12 months – a really sturdy determine.

And the enterprise remains to be rising. Gross sales rose by 11% final 12 months to only over £2bn, supporting an 8% rise in pre-tax revenue to £204m. These numbers are very respectable and don’t appear to recommend a enterprise that’s in decline.

So why have Greggs shares been falling?

The inventory market is all in regards to the future, not the previous. So far as I can see, the primary motive why Greggs’ share price has been falling is that buyers are beginning to surprise if the corporate’s progress has peaked.

In spite of everything, final 12 months’s 11% gross sales rise was supported by 145 internet new retailer openings.

Gross sales in shops which have been open for greater than a 12 months rose by simply 5.5%. That compares to an equal progress determine of 13.7% in 2023.

Worse nonetheless, the corporate stated that within the first 9 weeks of 2025, so-called like-for-like gross sales progress slowed to only 1.7%. It blamed unhealthy climate in January, however gross sales progress has now been slowing for greater than a 12 months.

I ponder if Greggs might be reaching a pure restrict on its dimension. In spite of everything, the corporate now has greater than 2,600 outlets within the UK. That’s roughly the identical as Costa Espresso and practically 50% greater than McDonald’s.

Why I’m tempted to purchase

But I believe Greggs is a superb food-to-go operator and a superb advertising and marketing organisation. I count on it’s going to stay profitable.

Though I do count on progress to gradual over the approaching years, I believe the shares might nonetheless be a worthwhile funding on the proper price.

So, is the price proper for me immediately? The shares are at present buying and selling on a ahead P/E of 14 with a 3.6% dividend yield. As I discussed in the beginning, I reckon that is in all probability the most cost effective they’ve been for round 10 years.

Nevertheless, I can’t ignore the chance that Greggs might face a troublesome 12 months forward, maybe triggering a reduce to earnings forecasts.

It’s potential that I’m being too cautious. However for an additional margin of security, I’d prefer to see some signal that slowing gross sales progress has levelled out earlier than I resolve to speculate. Greggs will keep on my watchlist for a bit of longer.