Greggs (LSE: GRG) shares have smashed it because the pandemic. I don’t maintain the excessive avenue bakery chain in my portfolio, however I want I did. Now I’m questioning if it’s the fitting time to purchase.

The Greggs share price has soared by 47.1% within the final two years. The inventory would have turned a £10,000 funding into £14,710. With dividends, the whole could be nearer to £15,500.

After all, with hindsight we would all be millionaires. Currently, Greggs shares have slowed. They’re up simply 2.93% over the past 12 months. Over the identical interval, the FTSE 250 as an entire grew 5.72%.

Traders love Greggs, judging by the site visitors on our website, however there’s a problem right here. Perhaps they adore it slightly an excessive amount of. 

FTSE 250 development inventory

There’s actually quite a bit to love. 2023 noticed “another year of rapid growth and strong progress”, within the phrases of CEO Roisin Currie. Whole gross sales jumped 19.6% to £1.81bn, as Greggs expanded its community of shops past 3,000. It additionally offered extra per retailer, with like-for-like gross sales up a tasty 13.7%. Pre-tax earnings jumped 13% to £167.7m.

In October 2021, it introduced bold plan to double gross sales inside 5 years and it has made a powerful begin. If it disappoints, the backlash may very well be brutal, which brings me to that subject I discussed.

The shares are a bit costly. Trading at 22.34 occasions earnings they’re 70% larger than the FTSE 250 common of 13.1 occasions. Markets have priced a number of development in there. If it doesn’t come via, the share price might take successful.

I’m fairly optimistic about Greggs’ prospects. It’s a excessive avenue fixture now. It survived pandemic lockdowns and has thrived through the cost-of-living disaster. As a purveyor of low cost treats, it may need benefited as consumers traded down.

The shares might do even higher when individuals have a bit extra cash to spend. Though there’s a hazard they may commerce up to one thing pricier as a substitute.

It additionally pays dividends

Greggs isn’t nearly development. It pays dividends too. Whereas the yield is simply 2.21% the board has labored laborious to reward shareholders after being pressured to drop shareholder payouts through the pandemic. Right here’s what the charts say.

Chart by TradingView

The board elevated the 2023 dividend by 5% from 59p to 62p per shares, and paid a particular dividend of 40p on prime. It might simply afford that, with internet money from working actions after lease funds up 29% to £257m.

But I don’t suppose it’s the fitting time for me to purchase Greggs at the moment. That prime valuation appears to counsel that its shares have gone so far as they will for now. They’ve been idling since full-year outcomes have been revealed in March. Traders might have gotten slightly bit too carried away.

There’s additionally the underlying danger that every one these messages about wholesome consuming and processed meals lastly get via. Greggs’ ironic cult standing might now be priced into its valuation. However what if consumers determine the joke isn’t humorous anymore? I wouldn’t need to be holding the shares if tastes change, and gained’t purchase it. I can discover higher worth on the FTSE 250 at the moment.