FTSE 250 constituent Greggs (LSE: GRG) has been a high performer on the index. Within the final decade, its shares have risen a staggering 464.4%. By comparability, the FTSE 250’s up simply 30%.

This 12 months, they’ve additionally outperformed the index. The Greggs share price has climbed 16.4%. The FTSE 250, however, is up 4.4%.

However this spectacular progress has me questioning what might be subsequent for the sausage roll maker? Is there any worth left to squeeze out of its share price? That’s what I need to reply.

Valuation

Let’s start with its valuation. That can give us base to work with. I’m going to evaluate Greggs utilizing the important thing price-to-earnings (P/E) ratio.

As proven beneath, the inventory trades on a P/E of twenty-two.6. The FTSE 250 common is round 12. Based mostly on that, Greggs seems costly.

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However what if we glance forward? Arguably, that’s extra essential. Properly, its ahead P/E, as seen beneath, paints an analogous image. Whereas it’s cheaper, that’s not by a lot. Its ahead P/E is 21.3.

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The enterprise

So it could seem like Greggs is overvalued in the present day. However the agency’s progress lately has been sensible. What’s to say it doesn’t preserve up this robust efficiency? If it does, that may most actually translate right into a rising share price, proper?

Its newest outcomes are a testomony to its progress trajectory. For the primary half of the 12 months, gross sales rose 13.8% to £960.6m, whereas revenue earlier than tax was up 16.3% to £74.1m. Its interim dividend additionally rose a wholesome 18.8% to 19p.

Which means the enterprise continued with its nice type from final 12 months. Throughout 2023, complete gross sales climbed 19.6% to £1.8bn. Revenue earlier than tax additionally jumped 13.1% to £167.7m.

That’s even with the powerful financial circumstances we’ve confronted in current occasions, comparable to a cost-of-living disaster. That mentioned, it was at all times seemingly {that a} enterprise like Greggs, which focuses on offering an reasonably priced menu, was set to thrive throughout these occasions. Its outcomes actually present that.

Lengthy-term tendencies

However as a long-term investor, there’s a difficulty that considerations me. There’s been a big push to advertise more healthy consuming habits lately.

Many shoppers at the moment are extra acutely aware than ever about what kind of meals they put of their physique. Whereas it could style good, the ultra-processed meals Greggs has to supply doesn’t align with a wholesome way of life.

Plans for progress

After all, that’s discrediting the truth that Greggs is a enterprise with extremely robust model recognition and massive plans for progress. It opened 51 internet new shops within the first half of 2024. It plans to open 140-160 new shops for the entire of the 12 months. Going ahead, Greggs has its sights set on opening up to three,500. It presently has slightly below 2,500.

Higher alternatives

However even contemplating that, I’m cautious. And with its shares wanting costly, I’ll be steering away from Greggs. For now, it’ll keep on my watchlist. I see higher alternatives within the FTSE 250 I plan to capitalise on.